Gold gains as USDX weakens, U.S. bond yields dip

Gold prices are solidly higher in midday U.S. trading Tuesday, supported by a weaker U.S. dollar index and a downtick in U.S. Treasury yields to start the U.S. trading week. The yellow metal hit a nine-week low overnight. Short covering in the futures market and some bargain buying in the cash were also featured today. August gold was last up $17.10 at $1,980.20 and July silver was down $0.015 at $23.34.

Trader and investor attitudes are more upbeat this week. Republican and Democratic leaders have agreed upon a deal to raise the U.S. government's debt limit. House and Senate votes on the matter are likely to occur later this week.

Asian and European stock markets were mostly firmer overnight. U.S. stock indexes are mixed to firmer at midday.

The World Gold Council reported its survey shows 24% of central banks intend to increase their gold holdings in 2023. Reasons include higher inflation, geopolitical turmoil and interest rate worries.

  Gold price trades below $1,950 ahead of Congress debt ceiling vote and June Fed decision

The key outside markets today see the U.S. dollar index down on a corrective pullback after hitting a two-month high last week. Nymex crude oil prices are solidly lower and trading around $69.50 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.702%.

Technically, August gold futures prices hit a nine-week low early on today and then rebounded to score a bullish "outside day" up. Bulls have the slight overall near-term technical advantage. However, prices are in a four-week-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at $1,985.00 and then at $2,000.00. First support is seen at $1,965.00 and then at today's low of $1,949.60. Wyckoff's Market Rating: 5.5

July silver futures prices hit a nine-week low Friday. The silver bears have the overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at today's high of $23.51 and then at $23.75. Next support is seen at $23.00 and then at the May low of $22.785. Wyckoff's Market Rating: 4.0.

July N.Y. copper closed down 160 points at 366.60 cents today. Prices closed near mid-range. The copper bears have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 385.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 335.00 cents. First resistance is seen at today's high of 371.10 cents and then at 375.00 cents. First support is seen at today's low of 362.70 cents and then at 360.00 cents. Wyckoff's Market Rating: 3.5.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

U.S. economic data hammers gold price as markets gear up for a rate hike in June

The gold market got battered by upbeat economic data and stubbornly high inflation. As gold posted its third weekly loss, markets recalibrated for another 25-basis-point rate hike in June after pause expectations got shattered.

Gold is looking to close down $35 on the week, with June Comex gold futures last trading at $1,945.80 an ounce. Despite the selloff, year-to-date gold is still up more than 6%.

The macro data was the main driver weighing on gold at the end of the week, TD Securities global head of commodity strategy Bart Melek told Kitco News.

"The durable goods number, personal spending, and the PCE inflation measures were all broadly above expectations," Melek said. "Not only is inflation not dropping, the Federal Reserve's preferred inflation measure — the core PCE price index — went to 4.7% in April."

Inflation near 5% is too high for the Fed to justify a pause in June, and the market is pricing that in. The latest market expectations see a 60% chance of a hike at the June 13-14 meeting, Gainesville Coins precious metals expert Everett Millman told Kitco News.

"That is a big reversal from earlier estimates," he said. "The speed at which this kind of re-pricing happens gets the attention of the gold market. Rapid changes in expectations lend themselves to more volatility."

On top of that, the U.S. dollar has performed well, and gold responded with a move down. "We think gold prices may be subdued for much of the quarter and probably into the early part of Q3," Melek said. "The market has mispriced Fed's intentions."

With the Fed zeroed in on inflation, not much will likely sway the central bank before the June meeting. Millman added that the debt ceiling debate drama is the one thing to closely monitor as any downgrades to the U.S. credit rating would trigger safe-haven flows into gold.

Meanwhile, negotiations to raise the U.S. government's $31.4 trillion debt ceiling before June 1 hit some obstacles on Friday. Earlier, Democratic and Republic negotiators appeared nearing a deal to lift the debt cap for two years while limiting some spending.

"We have made progress," lead Republican negotiator Garret Graves told reporters. "I said two days ago, we had we had some progress that was made on some key issues, but I want to be clear, we continue to have major issues that we have not bridged the gap on chief among them work requirements."

Gold price levels to watch

The next support level for gold is $1,940 an ounce, Millman said. Below that, investors should watch the $1,915 and $1,900.

Analysts do not rule out a move lower to $1,900. "Firm support is at around $1,900-$1,896," Melek said.

It is too soon to call a bottom in gold even though the precious metal is down more than $125 since testing record highs a few weeks ago, RJO Futures senior market strategist Frank Cholly told Kitco News.

"The market is telling us we will see another rate hike in June and maybe one in July. Gold doesn't like that," Cholly said. "Somewhere between the $1,950-$1,925 range on August futures, traders will find value, and the market will form a base before turning higher," he said.

Data next week

Tuesday: U.S. CB consumer confidence

Wednesday: U.S. JOLTs job openings, Beige Book

Thursday: U.S. jobless claims, U.S. ADP nonfarm employment, U.S. ISM manufacturing PMI

Friday: U.S. nonfarm payrolls

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold/Silver: A breakdown in two-year treasury yields triggers the next bull market

I wish everyone a Happy Memorial Day weekend and thank all of you for the positive feedback over the years, and it is an absolute pleasure to write for you all. Digging into the precious metals markets, we have been under pressure for most of May after the banking crisis became more of an isolated incident rather than the contagion effect everyone feared most. With that story fading into the sunset, a new story surrounding a potential U.S. Default was born where a new batch of speculators piled into the long side of the Gold and Silver while shorting U.S. Equities. Those traders are the ones that often "buy the tops while selling the bottoms" and vice versa. Thursday's massive rally in the Nasdaq and breakdown below $1950 on Gold most likely cleaned those short-term speculators out of the market. As the deadline for the debt ceiling approaches this week, the volatility in the precious metals and equity markets should continue to mount.

I expect this week to see a last-minute agreement and the "can kicked down the road again," where precious metals will most likely capitulate at that point, making a lower low on the day while closing unchanged or higher on the day. Is that enough to get Gold back to a neutral or bullish trend? Most likely not. We will need U.S. economic data to continue to cool, reducing the expectations of another interest rate hike in July and, ultimately, a "Fed Pivot." At that point, Two-Year Treasury Yields will likely have "peaked," marking a top in the U.S. Dollar and a bottom in Gold. Most of you have yet to see a Two-Year Treasury Yield chart in relation to the Gold market, so I want to share that below.

Daily Two-Year Treasury Yield Chart

Daily Gold Chart

The technical backdrop leaves Gold in a "bearish trend" as Fed fund futures are pricing another interest rate hike in July and one or two rate cuts by year-end. Gold remains near critical support at $1950 and needs to recapture $1980 on the charts to challenge $2000. Once Gold closes above $2000, the talking heads on financial news networks will wake up and begin the chase again, leaving all-time highs back in play. Remember, the playbook is similar to the 2018-2020 Gold bull market, where the Fed indicated there would be three more rate hikes, and ultimately none happened. The Fed reversed course and started cutting rates. That drove Gold up $650, which leaves our $2500 target achievable in the next 12-18 months.

To further help you develop a trading plan, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold that can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.

Daily Silver Chart

The chart pattern in Silver has been strikingly similar to that of Gold since the beginning of May, with prices rejecting the first breach of the 50% retracement at $23. The recent correction gives us another excellent opportunity to add to core positions using the December 1000 oz Silver contract. Over the next 18-24 months, we expect Copper to make new all-time highs and Silver to break $35/oz.

Having the flexibility to enter and exit the market quickly makes it essential for Precious Metals investors to have a futures trading account alongside their core Physical Precious Metals holdings. If you are interested in speculating on the rise and fall of the price of Precious Metals on a shorter-term basis, such as two weeks or two months, or If you have never traded futures or commodities, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.

By

Phillip Streible

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold trades below its 100-day MA as hope of a potential debt-ceiling resolution advances

Gold futures basis the most active June 2023 Comex contract traded briefly below the 100-day simple moving average at $1939.50. Gold futures traded to a low of $1939 just $0.50 below its 100-day moving average which technical traders use as a benchmark to determine the interim trend of a stock or commodity. As of 5:00 PM EDT, the June contract is currently down $22.90 or 1.17% and fixed at $1941.70.

With just one day left before the United States begins a three-day holiday weekend in honor of Memorial Day, both Republican and Democratic leaders have expressed optimism that current negotiations will lead to a deal with legislation that raises the debt ceiling before the XDate occurs.

According to Reuters News, "U.S. President Joe Biden and top congressional Republican Kevin McCarthy on Thursday appeared to be nearing a deal to cut spending and raise the government's $31.4 trillion debt ceiling, with little time to spare to head off the risk of default."

A source cited by Reuters says that "the two sides are just about $7 billion apart on a total figure that would be well over $1 trillion".

A potential upcoming deal that would resolve the debt ceiling crisis has pressured gold dramatically lower now for the fourth consecutive day. Gold futures have declined almost $40 from Friday’s opening price of $1978 down to its current fix just below $1942 per ounce.

On a technical basis gold breached a Fibonacci 50% retracement today of $1947.80. The data set used for this retracement begins at $1810 (the lows that occurred in February of this year) to $2085. Gold’s 100-day moving average at $1939.50 was breached in trading today and becomes the first level of potential technical support. Below that the next level of technical support for gold futures at $1915 per ounce, which represents a 61.8% Fib retracement.

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Extreme dollar strength and 1 month T-Bills yielding 5.59% move gold lower

Market participants are witnessing extreme dollar strength and exceedingly high yields in short-term Treasury Bills as continued uncertainty and angst surrounding negotiations to raise or suspend the debt ceiling are still at a stalemate. The US dollar has climbed higher for the last three consecutive weeks after trading to a low at the beginning of May at 101. The dollar gained 0.42% today with the dollar index currently fixed at 103.815. That is a net gain of almost 3% in May.

Although salmon consistently swim upstream, gold has been fighting the currents of dollar strength and high yields and has been unable to gain any traction as a haven asset because no legislation has been forthcoming from negotiations. After hitting a high of $2085, just shy of the record high about a month ago gold prices have declined dramatically trading to a low today of $1958.40. Gold futures have traded below $1960 per ounce on four of the last five trading days.

The Federal Reserve released the minutes from the last FOMC meeting held in May. The minutes revealed that numerous Federal Reserve officials believed the most prudent path would not contain rate hikes in the near future. That being said, Fed officials were not unified in that belief.

There were Federal Reserve officials that said that because the economy has evolved as anticipated "then further policy firming after this meeting may not be needed." The minutes also revealed that some officials of the Federal Reserve underscored the need that they should communicate that interest rate cuts were not likely this year although further hikes cannot be completely ruled out. The minutes showed that members were laser-focused on stress in the banking system and the failure of multiple banks in the United States incorporating that into their forecast and more importantly forward guidance.

Even a more dovish stance by Federal Reserve members was not able to be supportive of gold pricing as the precious metal tumbled its near recent lows. It seems the expectation of market participants is under the assumption that a resolution to the debt ceiling negotiations will be forthcoming. That assumption combined with extreme dollar strength and strong yields from short-term US debt instruments continues to keep gold pricing range bound and trading near the lows of $1960 per ounce.

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

The solution to the raising the U.S. debt ceiling is not going to be a cake walk

Short-term T-bills maturing between June 6th through 15th are currently yielding 5.997%, an indication of the angst regarding whether a debt ceiling resolution can be reached on time before threatening a government default of its financial obligations. The uncertainty regarding the negotiations has moved the one-year T-bill with an issue date of June 2022 maturing on June 15 to a yield of 6.141%.

This is because T-bills maturing between June 6 and 15th are seen as the riskiest investment with the real possibility of delayed payment, according to Lawrence Gillum of LPL Financial. According to MarketWatch, "At the moment, the T-bill market is in a state of dislocation — one in which yields ranged from as little as 2.924% on the government obligation maturing on May 30 to as high as 6.141% on the 1-year bill maturing in three weeks."

The financial backdrop created by the uncertainty of a resolution in passing legislation to either suspend or raise the debt limit by the first or second week of June has strengthened the dollar and pushed away the chance for any upside moves in gold.

Gold futures continue to trade near recent lows at around $1960 with resistance occurring just above $1980. Today the most active June 2023 Comex contract gained only $0.30 on the day and is currently fixed at $1977.50. However, it is the low that is most troublesome trading to an intraday low today of $1955.80 before recovering. That being said, the differential between the open and closing prices is just a couple of dollars.

Although gold futures were able to recover off of earlier lows the uncertainty of a debt ceiling resolution is not enough to prompt traders to bid the precious yellow metal higher. This is because the consensus among traders is while there is uncertainty ultimately the issue will be resolved either by a temporary stopgap bill that adds more time and raises the debt ceiling or an actual piece of legislation that both the Democratic and Republican constituents can agree upon.

The debt ceiling has been reached and raised more times than one can count and on the vast majority of occasions, legislators simply played kick the can down the road taking the dilemma to an 11th-hour showdown. However, in this case, it seems a little bit different in that rather than playing kick the can they are playing a high-stakes game of chicken in which both sides are waiting for the other side to blink first. While both the Republicans' and Democrats' desires have components of budgetary concerns that are realistic, the sad truth is that you can’t have your cake and eat it too.

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Debt-ceiling talks between Biden and McCarthy to resume at 5:30 EDT

The latest round of debt-ceiling talks between the President and House Speaker will begin tonight at 5:30 PM EDT. While both sides have presented optimism on passing legislation that would temporarily suspend, or raise the debt limit ceiling, the Democrats and Republicans are still far apart.

Comments by the House Speaker today emphatically stated that "nothing is agreed to and there are still a lot of obstacles for a deal." This after a phone call between the president aboard Air Force One and McCarthy Sunday evening was "productive" according to McCarthy. President Biden held a news conference in Hiroshima where he criticized the legislation proposed by the house saying that he could not promise fellow world leaders that the United States would not default.

On Sunday President Biden said that he believes he has the authority to invoke the 14th amendment as a potential solution if the negotiations continue to result in a stalemate. However, the U.S. Treasury Secretary, Janet Yellen believes that the 14th Amendment is not a viable option as it cannot "be used appropriately in these circumstances, given the legal uncertainty surrounding it and given the tight deadline in which we find ourselves".

In an interview on Sunday with NBC Janet Yellen again had a strong warning about what was at stake if the two sides aren't able to reach a resolution and raise or suspend the debt ceiling.

"I indicated in my last letter to Congress that we expect to be unable to pay all of our bills in early June and possibly as soon as June 1. And I will continue to update Congress, but I certainly haven't changed my assessment. So I think that that's a hard deadline,"

According to a Moody's Analytics report, a default could lead to more than 7 million Americans out of work and the loss of $10 trillion in individual household wealth.

However, gold traded lower today temporarily disregarding the ongoing debt ceiling negotiations instead focused on statements made by Federal Reserve officials going against the grain of Powell's speech last week.

In an interview with CNBC, Minneapolis Fed President Neel Kashkar indicated that interest rates could go above 6% before the Federal Reserve reaches its 2% inflation target. This was an agreement with St. Louis Fed President James Bullard said that there might be a need to go higher on the policy rate.

As of 5:20 PM EDT, gold futures basis most active June contract is trading under pressure, down $7.90 and fixed at $1973.70. With the meeting between the president and the House Speaker to begin in about 10 minutes, we could see gold trade with extreme volatility this evening.

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold price could 'easily' regain $2k next week as more debt ceiling troubles ahead – analysts

Even though gold is wrapping up the week down $30 — its worst performance since February — the Friday afternoon rebound keeps the bullish gold trend alive.

The gold market recovered after Federal Reserve Chair Jerome Powell said rates might not have to rise as much due to tighter credit conditions after the banking sector turmoil.

"The financial stability tools helped to calm conditions in the banking sector. Developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation," Powell said at the Thomas Laubach Research Conference Friday. "So, as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals. Of course, the extent of that is highly uncertain."

This was a sign that the Fed could pause in June. After Powell's comments, market expectations of a rate hike in June fell from nearly 50% to 20%, according to the CME FedWatch Tool.

The news calmed the gold sellers after market participants began to price in another 25-basis point hike next month and pared bets of a rate cut in the second half of the year.

At the May meeting, the Fed hiked for the tenth consecutive time, which brought the federal funds rate to a 5-5.25% range – the highest since mid-2007. In just over a year, the Fed raised rates by 5%. The next monetary policy meeting is scheduled on June 13-14.

On top of the shifting rate expectations, the debt ceiling progress was dealt a blow on Friday afternoon as talks to raise the federal government's $31.4 trillion debt cap paused.

"Wall Street thought we were going to see bill text over the weekend or early on Monday, with a potential vote in the middle of the week," said OANDA senior market analyst Edward Moya. "That seems less likely now and could raise the risk that we won't get an agreement before June 1st, the so-called X-date."

Keeping in mind the divisiveness of U.S. politics, the debt ceiling issue will get more heated again, Moya told Kitco News.

"You are going to start to see a bit more difficulty in negotiations. Gold will be in the wait-and-see mode to figure out which part of the economy will break," he said Friday. "The consumer is clearly weakening. A lot of the data still supports a recession."

Rate cut bets pared

One development that will continue to weigh on gold is pared-back rate cut expectations, Gainesville Coins precious metals expert Everett Millman told Kitco News.

"Almost everyone in the marketplace was convinced that the Fed was about to cut rates in the second half of this year. But because inflation didn't come down as much, the economy is holding up, and the unemployment rate is low, big traders are unwinding those rate cut bets," he said Friday.

And with gold testing record highs just over two weeks ago, traders are also taking some profits off the table, accelerating the move lower, Millman added.

Overall, it's been a disastrous week for gold, but it's ending on a positive note, Moya noted. "People are having second thoughts on whether we are headed towards a recession that is killing safe-haven demand," he told Kitco News. "This has been an interesting period where we really had so many risks on the table — banking crisis, debt ceiling, massive layoff announcements."

 

What's next for gold price

Millman's base-case scenario is that gold rebounds from here — something that it has done time and time again this past year.

"If you look at the pattern, gold does keep putting in higher lows and higher highs. Although I wouldn't rule out a drop to $1,900, my base scenario is to see gold rebound as it has each of the last several selloffs," Millman said.

After Powell's comments, there is a good chance that the Fed will pause in June, which gives the U.S. central bank optionality going forward, Millman noted.

"Keep in mind that it takes 12-18 months for rate hikes to really start showing up in economic data. The Fed has been hiking aggressively in a pretty short span of time, and we won't see results until the second half of this year. A pause in June would be reasonable," he said.

Gold's immediate resistance would be $1,980 and then $2,000 an ounce. A solid support level is at $1,960-50, Millman pointed out. If that fails, then $1,900 could come into play.

Moya also sees support at $1,950 and resistance at $2,000 an ounce. "If debt ceiling talks continue to struggle, prices could easily stabilize above the $2,000 level next week."

At the time of writing, June Comex gold futures were trading at $1,983.80, up 1.22% on the day.

 

Next week's data

Markets are closely monitoring the FOMC May meeting minutes next week, the U.S. GDP update, and the Fed's favored PCE inflation indicator.

"Inflation … looks set to remain elevated, which could keep the market on edge about a possible June interest rate hike," said ING chief international economist James Knightley. "Nonetheless, the activity backdrop continues to soften, with real consumer spending set to come in flat on the month in April. Recession risks remain high given the rapid tightening in lending conditions in the wake of recent bank failures, and we still see the potential for lower interest rates before the end of the year."

Tuesday: U.S. new home sales

Wednesday: FOMC May meeting minutes

Thursday: U.S. GDP Q1, U.S. jobless claim

Friday: U.S. PCE price index, U.S. durable goods order

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold rallies to daily high on short covering, Powell remarks

Gold prices have pushed to double-digit gains in late-morning trading Friday. Short covering by the shorter-term futures traders, after the recent solid price losses, is featured. Also, the yellow metal rallied as Federal Reserve Chairman Jerome Powell said in a panel discussion that developments in the banking sector may mean interest rates may not need to rise as much to meet the Fed’s policy goals. However, other comments Powell made at the panel discussion were not dovish, as he said the FOMC is strongly committed to returning to the 2% annual U.S. inflation goal. A sell off in the U.S. dollar index today is also aiding the precious metals market bulls. June gold last up $16.90 at $1,976.70.

Live 24 hours gold chart [Kitco Inc.]

By

Jim Wyckoff

For Kitco News

www.kitco.com

Time to Buy Gold and Silver

David