Gold, silver a bit firmer after tame U.S. inflation report

Gold and silver prices are slightly higher in choppy, two-sided trading at midday Thursday. The metals are supported by a U.S. consumer price index report that came in a bit tamer than market expectations. However, gains are limited as the U.S. dollar index has pushed well up from its early-session lows and as U.S. Treasury yields have up-ticked slightly. December gold was last up $2.30 at $1,952.60 and September silver was up $0.184 at $22.92.

The U.S. data point of the week saw the July U.S. consumer price index up 3.2%, year-on-year, which is slightly below the consensus forecast of up 3.3%. The CPI rose 3.0% in the June report. Meantime, the weekly U.S. jobless claims report came in a bit higher than expectations. These two reports fell into the camp of the U.S. monetary policy doves. Today's data also suggests the Federal Reserve will not raise interest rates at its September meeting. The U.S. producer price index report is out on Friday morning.

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

A Wall Street Journal headline today reads: "China slips into deflation in warning sign for World economy." This follows a 0.3% drop in China's consumer price index in July.

Another WSJ headline today reads: Sputtering trade fuels concerns about a fractured global economy." This headline follows downbeat China import and export numbers reported earlier this week.

The summertime rally in the U.S. stock market has hit a speed bump, gold and silver prices have dipped, while grain markets have also sold off—all due in part to the slowing Chinese economy creating concerns about less demand for global supplies.

Look for China's central bank to continue to implement economic stimulus measures in the coming weeks, in an effort to prop up the listing Chinese economy. Importantly, if the stimulus does not put a charge into the Chinese economy in the coming few months, the other major economies of the world will start to feel the sting of the slower China growth. Such a scenario would be significantly bearish for raw commodity markets, as China is a voracious consumer of raw commodities. Global stock and financial markets would also likely be negatively impacted by a weakening of the Chinese economy.

  Gold price to rise as investors lose faith in U.S. dollar – Commodity Discovery Fund's Willem Middelkoop

In the coming weeks, keep a closer eye on economic data coming out of China—because the "smart money" in the marketplace will be doing the same and acting upon that data.

The key outside markets today see the U.S. dollar index modestly lower after trading solidly lower and hitting new daily lows following the U.S. CPI data. Nymex crude oil prices are down and trading around $83.50 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.018%.

Technically, December gold futures prices hit a five-week low today. Bears have the overall near-term technical advantage. Prices are in a three-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 the June low of $1,939.20. First resistance is seen at today's high of $1,963.50 and then at Tuesday's high of $1,972.80. First support is seen at $1,939.20 and then at $1,925.00. Wyckoff's Market Rating: 4.0.

September silver futures prices hit a four-week low today. The silver bears have the overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $24.50. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at $23.255 and then at $23.50. Next support is seen at today's low of $22.665 and then at $22.34. Wyckoff's Market Rating: 4.0.

September N.Y. copper closed down 125 points at 377.10 cents today. Prices closed near the session low. The copper bears have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the July high of 402.40 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 356.50 cents. First resistance is seen today's high of 383.15 cents and then at this week's high of 387.70 cents. First support is seen at Wednesday's low of 376.45 cents and then at this week's low of 372.65 cents. Wyckoff's Market Rating: 3.5.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

David

Gold, silver weaker on more weak China data, technical selling

Gold and silver prices are down in midday U.S. trading Wednesday, with both metals dropping to four-week lows. The precious metals are pressured by another economic report out of China that suggests less consumer demand for goods and services, which includes metals. Chart-based selling is also featured at mid-week, as the near-term technical postures for gold and silver have turned more bearish. December gold was last down $7.80 at $1,952.10 and September silver was down $0.057 at $22.75.

There was more downbeat economic data coming out of China today. The second-largest global economy has slipped into deflation territory for the first time in two years, due to weaker consumer demand. Chinese consumer prices fell 0.3% in July, year-on-year. The reading was in line with market expectations.

Asian and European stock markets were mixed to firmer in overnight trading. U.S. stock indexes are weaker near midday.

Key U.S. inflation reports this week are also in focus for the marketplace. The July U.S. consumer price index it out Thursday and the producer price index is out Friday. Both the CPI and PPI are expected to uptick just a bit from the June reports.

'If you are going to take big risks, it has to be for big rewards' – Rick Rule on resource investing

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil prices are higher and trading around $84.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.182%.

Technically, December gold futures prices hit a four-week low today. Bears have the overall near-term technical advangtage. Prices are in a three-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 the June low of $1,939.20. First resistance is seen at today’s high of $1,966.10 and then at Tuesday’s high of $1,972.80. First support is seen at $1,950.00 and then at $1,939.20. Wyckoff's Market Rating: 4.0.

September silver futures prices also hit a four-week low today. The silver bears have the overall near-term technical advantage. Prices are in a fledgling 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 the June low of $22.34. First resistance is seen at $23.00 and then at Tuesday’s high of $23.255. Next support is seen at $22.50 and then at $22.34. Wyckoff's Market Rating: 4.0.

September N.Y. copper closed up 250 points at 379.15 cents today. Prices closed near mid-range. The copper bears have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the July high of 402.40 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 356.50 cents. First resistance is seen Tuesday high of 384.20 cents and then at this week’s high of 387.70 cents. First support is seen at today’s low of 376.45 cents and then at this week’s low of 372.65 cents. Wyckoff's Market Rating: 4.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

David

Gold, silver down amid rising bond yields, hawkish Fed-speak

Gold and silver prices are lower in midday U.S. trading Monday, with silver prices sharply down and hitting a four-week low. The precious metals are seeing selling interest on rising U.S. Treasury yields, hawkish comments from a Federal Reserve official, and as the near-term technical postures for both markets have turned slightly bearish. December gold was last down $8.10 at $1,968.00 and September silver was down $0.491 at $23.23.

Some hawkish “Fed speak” over the weekend also dampened the metals market bulls today. Federal Reserve governor Michelle Bowman expressed the potential need for further increases in U.S. interest rates to successfully lower inflation to the Fed's target of 2%. Despite recent data suggesting a slow inflation trend, Bowman recommended consistent evidence proving inflation is significantly moving toward the 2% target. Additionally, Fed officials Raphael Bostic and Austan Goolsbee analyzed recent jobs data and suggested that the labor market is improving, which might prompt the Fed to reconsider how long they should maintain the current elevated rates.

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

Key U.S. and China inflation reports this week will be the major data points for the marketplace. The U.S. consumer price index for July is out Thursday, followed by the July producer price index on Friday. July CPI is expected to uptick a bit from the June report, seen at up 3.3%, year-on-year, compared to the 3.0% rise in June. The PPI in July is also expected to rise slightly from June.

  Central banks become net gold buyers in June, ending three-month selling streak

Traders will also be closely watching the U.S. Treasury market this week, as prices have been dropping (yields rising).

The key outside markets today see the U.S. dollar index slightly higher. Nymex crude oil prices are lower and trading around $82.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.088%.

Technically, December gold futures bears have the slight overall near-term technical advangtage. Prices are in a fledgling downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the July high of $2,028.60. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at today's high of $1,981.70 and then at $1,992.20. First support is seen at last week's low of $1,954.50 and then at $1,950.00. Wyckoff's Market Rating: 4.5.

September silver futures prices hit a four-week low today. The silver bears have the slight overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the July high of $25.475. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at today's high of $23.775 and then at $24.00. Next support is seen at $23.00 and then at the July low of $22.72. Wyckoff's Market Rating: 4.5.

September N.Y. copper closed down 400 points at 382.75 cents today. Prices closed near the session low today. The copper bulls have the slight overall near-term technical advantage. Prices are still in a nine-week-old uptrend on the daily bar chart, but just barely. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the April high of 418.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the June low of 368.30 cents. First resistance is seen at today's high of 387.70 cents and then at 390.00 cents. First support is seen at last week's low of 382.05 cents and then at 380.00 cents. Wyckoff's Market Rating: 5.5.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

David

Analysts more bullish on gold following lower job growth, higher wage inflation

The gold market rallied following a weaker-than-expected U.S. jobs report for July, which included downward revisions for May and June and strong wage growth, sending spot gold prices from $1931 to an intraday high of $1946.79

The latest Kitco News Weekly Gold Survey showed that the loss of momentum for the U.S. labor market, even as inflation pressures remain in place, had most market analysts bullish or neutral on gold's prospects for the coming week.

This week, 15 Wall Street analysts participated in the Kitco News Gold Survey. Eight of them, or 53%, said they expect to see higher prices for gold next week, while six analysts, or 40%, had a neutral outlook. Only one analyst predicted lower prices for the precious metal over the next seven days, representing 7% of the total.

Kitco Gold Survey

Wall Street

Bullish53%

Bearish7%

Neutral40%

"The U.S. jobs market is slowly cooling, and that's exactly what the Fed wants to see," said Adam Button, Chief Currency Analyst at Forexlive.com. "The market is increasingly comfortable that we are at the terminal rate in Fed funds. When that's confirmed, I think the only place for interest rates to go is down, which is bullish for gold."

Button said gold is already at a fairly elevated price despite strong headwinds from the Fed. "The starting spot right now is around $1940, so how high can gold run in a rate cutting cycle?" he asked. "We've seen high real rates, and when you take a step back and look at how gold has performed during this rate hiking cycle, it's extremely encouraging."

He added that while it's still a little bit early in seasonal terms, by the time Q4 rolls around it will be clear that the Fed is done and that rate cuts are coming in 2024. "That's when I expect gold to take off."

Button said he is also bullish on gold in the short term. "I expect next week's CPI report to emphasize that inflation is contained and will slowly subside, and that should help to lift gold," he said.

Marc Chandler, Managing Director at Bannockburn Global Forex, also sees upside potential for the yellow metal.

"I like gold higher next week," said Chandler. "I think the recent pullback, aided by a rise in rates and a stronger dollar, has run its course. A potential key upside reversal is unfolding after the employment data and gold's decline to a nearly four-week low slightly below $1926 in the spot market. A move back above $1950 suggests potential back toward $1965-$1970."

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, also expects gold to post gains in the coming days. "I am bullish on gold for the coming week," Cieszynski said. "Technically, it looks like the recent rally in USD and correction in gold is ending. If gold holds on to today's gains, we would have a really nice bullish Morning Star candlestick pattern."

And Darin Newsom, senior market strategist at Barchart.com, also saw technical confirmation that gold was poised for short-term gains.

"December gold is in position to complete a bullish key reversal on its daily chart, confirming the short-term trend has turned up," Newsom said. "Thursday's close saw daily stochastics complete a bullish crossover below the oversold level of 20%, a signal the short-term trend was set to change direction. The previous 3-wave downtrend began with a bearish key reversal on Thursday, July 20, with a high that day of $2,028.60."

"All that is needed for December gold to complete its pattern Friday is a close above Thursday's settlement of $1,968.80," he said.

Representing the neutral camp as he did last week, James Stanley, senior market strategist at Forex.com said he expects gold prices to remain in a sideways holding pattern, though he sees next week's inflation data as a key risk event. "Unchanged, but CPI can change that quickly depending on how it hits," he said.

Stanley said this week was another bear trap, and he doesn't see gold ready for a larger breakdown just yet. "USD was really strong and there was an open door for bears, but they didn't walk through it so I have to think the breakdown theme isn't here yet," he said. "The 1980 area is still key, so if we see a lower-high inside of that next week, the bearish case will grow a bit more attractive."

The lone voice of pessimism among market analysts this week was Kitco's own Jim Wyckoff, who said he sees enough evidence to expect gold prices to fall next week.

"Steady-lower as prices are in a fledgling downtrend on the daily bar chart," he said.

Gold prices continued to trade in positive territory on Friday afternoon, but the precious metal was still down 0.25% on the week, with spot gold last trading at $1940.56 at the time of writing.

By

Ernest Hoffman

For Kitco News

Time to Buy Gold and silver

David

CPI could be a make-or-break moment for gold next week as prices look for direction

The gold market is back in no-man's land as the price is pushed and pulled between rising bond yields and continued economic uncertainty. According to some analysts, next week's inflation data could be a "make or break" moment for the precious metal as it struggles to find direction.

Gold's neutral outlook comes as prices look to end the week holding critical near-term support levels but cannot generate enough momentum to retest important resistance. December gold futures last traded at $1,977 an ounce, down 1% from last week.

Although the gold market is looking to end the week off its lows, analysts note that the precious metal still faces some problematic headwinds as economic data does not provide definitive evidence that the Federal Reserve can ease away from its hawkish bias.

Friday's nonfarm payrolls report provided markets with a mixed picture at best as the headline employment number missed expectations, but wage inflation rose. The latest nonfarm payrolls report showed that 187,000 jobs were created in July, compared to economists' expectations for job growth of 200,000. At the same time, wages grew 0.4% last month.

Some analysts have said that for gold to regain its luster and hold gains above $1,980 an ounce, the June Consumer Price Index, published next week, must come in cooler than expected.

"I'm cautiously bullish on gold next week, but if CPI is weak and gold can't rally, then I think this market is done for now," said Dan Pavilonis, senior commodities broker with RJO Futures. "If gold can't rally in that environment, then I think the market needs to reset and consolidate at lower prices."

However, some analysts are not convinced that inflation is ready to drop further. Christopher Vecchio, head of futures and forex at Tastylive.com, said he is not convinced that inflation will reach the Fed's 2% target.

He added that base effects supporting CPI's decline since last year's highs are now working themselves out of the market. He also pointed out that the U.S. economy is facing a renewed rise in food and energy prices.

"I think the risk is that the inflation data supports the Fed's view that interest rates will have to stay higher for long. We could also see markets start to price in a November rate hike. That would create a tough environment for gold," he said.

Vecchio said that he is neutral on gold as he also doesn't want to bet against gold as it looks like U.S. 10-year bond yields above 4% could be peaking.

  Gold prices test critical support following Fitch downgrade, will take time to regain safe-haven status

"I haven't seen any direction in gold for a few weeks. Every time we bounce past $1,950, the rally doesn't last long; every time we drop below, the selloff doesn't last. Frankly, the technicals are a mess," said Vecchio.

He added that there is also a risk that even if the inflation data comes in weaker than expected, it might not be enough to change the Federal Reserve's hawkish basis as there are still a lot of numbers to be published ahead of September's or November's monetary policy meetings.

But it's more than just the Federal Reserve's monetary policy stance hanging over the gold market. The precious metal has found solid support as fears of a slowing economy support safe-haven demand.

Added to the mix was this past week's debt downgrade from Fitch Ratings. Tuesday night, the rating agency downgraded the U.S. government's long-term debt to 'AA+' from 'AAA.

Ed Moya, senior North American market analyst at OANDA, said there is a concern that this downgrade put more focus on the health of the U.S. economy and that rising bond yields could actually create some safe-haven demand for gold.

"If bond yields continue to rise, that could spook markets," he said. "Higher rates for longer is still an environment that gold can thrive in, especially if Wall Street becomes fixated over the deficit.

Despite gold's near-term volatility, Moya said there are still good reasons to be bullish on gold long term as the Federal Reserve nears the end of its tightening cycle.

"It's going to be a bumpy ride to get inflation down to 2%, but the Fed can achieve that goal because the economy is slowing," he said. "We are starting to see the end of monetary policy tightening as the Fed gets closer to its goal and that supports gold prices."

However, Vecchio said he doesn't expect the recent debt downgrade to create much fear in the market. He added that economic conditions are completely different than they were in 2011 when the S&P 500 spooked markets with its downgrade, which ultimately drove gold prices to then-all-time highs above $1,900 an ounce.

"The Fitch downgrade made a nice headline, but the criteria they used seems kind of flimsy," he said. "We saw bonds selloff this past week because investors are buying into the soft-landing and reducing their exposure to safe-haven assets."

While bond yields have room to move higher before they challenge the multi-year highs in October, analysts note that they are currently at levels that sparked the banking crisis in March and April, which saw several major regional U.S. banks collapse.

Next week's data:

Thursday: U.S. CPI, weekly jobless claims

Friday: U.S. PPI, University of Michigan Consumer Sentiment

By

Neils Christensen

For Kitco News

Time to Buy Gold and silver

David

Gold prices remain stuck in neutral as U.S. economy created 187K jobs in July, wages increase

The gold market is trying to hold critical resistance levels as the U.S. labor market loses momentum in July, even as inflation pressures remain in place.

U.S. nonfarm payrolls rose by 187,000 last month, according to the Bureau of Labor Statistics. The monthly figure was below the market consensus estimates of 205,000.

However, the report also noted that the U.S. unemployment rate saw a better-than-expected improvement, falling to 3.5%, down from 3.6% in June. Economists were expecting to see an unchanged reading.

The gold market is not seeing much reaction to the disappointing headline numbers. December gold futures last traded at $1,970 an ounce, roughly unchanged on the day.

According to some market analysts, the gold market could be struggling to gain solid bullish traction because the report noted that inflation remains a significant concern and could force the Federal Reserve to raise interest rates after the summer.

The report said that average hourly earnings rose by 14 cents or 0.4% last month to $33.74. The increase beat expectations as economists were looking for wages to rise 0.3%.

Along with the disappointing headline number, the report noted a downward revision in May and June. May's unemployment data was revised down to 281,000, down from the previous estimate of 306,000; at the same time, June's employment data was revised down to 185,000, down from the initial forecast of 209,000.

Naeem Aslam, chief investment officer at Zaye Capital Markets, said that the data would continue to fuel the ongoing tug of war in the marketplace as the latest data provides no definitive path for the U.S. central bank.

"There were also some mixed signals in the data point, which means that the Fed doesn't really have the confidence to go and increase the interest rate in the way that they would have liked," he said.

Aslam added that next week's inflation data will be a crucial piece of data for markets next week.

"Traders are highly likely to continue to live on the edge unless they see a clear downtrend in inflation, which is difficult to anticipate given an upswing in oil prices," he said.

Paul Ashworth, chief North American economist at Capital Economics noted that the disappointing data in the last two months shows job growth at its slowest pace in 2.5 years.

“The cyclical sectors of the economy contributed less than 100,000 additional jobs, pointing to a real economy that, echoing the muted survey-based evidence, is a lot weaker than the pick-up in second-quarter GDP growth suggested,” he said.

By

Neils Christensen

For Kitco News

Time to Buy Gold and silver

David

Gold, silver weaker amid surging U.S. Treasury yields

Gold and silver prices are moderately down in midday U.S. trading Thursday. The precious metals are feeling the pressure of rising U.S. Treasury yields and an up-trending U.S. dollar index. December gold was last down $6.30 at $1,968.70 and September silver was down $0.237 at $23.635.

The surprise downgrade of the U.S. government’s credit rating by Fitch has cast a pall over what was a generally upbeat summertime marketplace. The Fitch downgrade came amid no major changes in U.S. government policies or actions recently, but instead appears to be a recognition by Fitch of the bitter partisanship among lawmakers, including over raising the U.S. debt ceiling, in recent years. Some argue the Fitch news is just an excuse for the U.S. stock indexes to see downside corrections after recent good gains. As for rising bond yields this week, the Treasury yields have actually been trending higher (prices lower) since March. However, bond yields have accelerated their rise the past two days. JP Morgan chief Jamie Dimon, when asked about the significance of the Fitch credit downgrade to the U.S., replied that it did not mean much and that the true judge of U.S. creditworthiness is the markets.

Asian and European stock markets were mostly lower in overnight trading. U.S. stock indexes are slightly lower near midday.

In other news, the Bank of England raised its main interest rate by 0.25%, to 5.25%. The move was expected.

Traders are awaiting the U.S. data point of the week on Friday: the U.S. employment situation report for July. The key non-farm payrolls number is expected to come in at up 200,000 jobs, compared to a rise of 209,000 in the June report.

  No soft landing means 'we take out the all-time highs on gold by year-end' while equity collapse could drag Bitcoin below 15k – Gareth Soloway

The key outside markets today see the U.S. dollar index a bit weaker and hitting a four-week high overnight. Nymex crude oil prices are higher and trading around $81.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.196%.

Technically, December gold futures prices hit another three-week low today. Bulls and bears are on a level overall near-term technical playing field but the bears have downside momentum. Prices are in a fledgling downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the July high of $2,028.60. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at $1,075.00 and then at Wednesday’s high of $1,992.20. First support is seen at today’s low of $1,964.50 and then at $1,950.00. Wyckoff's Market Rating: 5.0.

September silver futures prices hit another three-week low today. The silver bulls still have lost their slight overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the July high of $25.475. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at $24.00 and then at $24.50. Next support is seen at today’s low of $23.41 and then at $23.25. Wyckoff's Market Rating: 5.0.

September N.Y. copper closed up 485 points at 389.20 cents today. Prices closed near the session high today. The copper bulls have the slight overall near-term technical advantage. Prices are still in a nine-week-old uptrend on the daily bar chart, but just barely. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the April high of 418.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the June low of 368.30 cents. First resistance is seen at 396.40 cents and then at 400.00 cents. First support is seen at today’s low of 382.05 cents and then at 380.00 cents. Wyckoff's Market Rating: 5.5.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

David

Gold's, and gold miners' fake rally was erased – just as expected

 

What a difference 24h can make, huh? Gold rallied visibly on Monday, only to give it back on Tuesday. Same with miners. What's next?

Gold and Miners' Volatile Ride

Exactly the same thing that was likely before yesterday's session. One of the things that indicated that decline was silver's outperformance – this indication rarely fails to deliver. It's surprising for those, who are new to the silver market, but it's true – the white metal tends to fake strength relative to gold right before the entire sector turns south. We saw that once again.

That was fake strength. Fake weakness was what we recently saw in the USD Index.

On July 14, when the USD Index was after the daily close at 99.49, I wrote the following:

And the thing is that the USD Index IS likely to reverse and soar very soon.

Slightly lower than expected CPI and lower than expected nonfarm payrolls didn't justify a decline this big. The market simply wanted to decline as it seems that the market participants are still in denial and expect the Fed to start cutting interest rates shortly once again. And it can't without limiting the demand. The move lower in the USD Index just made this task harder for the Fed as the U.S.-produced good just got much cheaper for foreign buyers.

On a technical front, each move below 101 (and 100 is even more profound support as it's an extremely round number) was quickly reversed and followed by a rally. And since we now also see a strong buy signal from the RSI (we haven't seen it this low in well over a year!), it's very likely that we're seeing a bottom in the making right now.

That's exactly what happened. That was a fake weakness, and it ended up being one of the most bullish monthly price patterns imaginable – we saw a monthly hammer reversal candlestick.

And you know what happened after the previous monthly reversal?

Rhyming History Points to Turmoil Ahead

The USD Index launched a powerful rally, even though the reversal that we saw back then (in early 2021) was not even as clear as the one that we saw in July 2023. The GDXJ ETF – proxy for junior mining stocks – topped when the USD Index reversed in early 2021, and it simply kept on declining with periodic corrections.

The point is: higher GDXJ prices were never seen since that time, even though the general stock market moved higher since that time, which “should have” contributed to the miners' rally.

Speaking of stocks, please take a look at what happened in them yesterday and what's happening in the S&P 500 futures in today's pre-market trading.

The above chart features daily price changes (each candlestick is one trading day), and the below chart features the 4-hour candlesticks.

The S&P 500 futures formed a clear shooting star reversal in late July, and it can also be viewed as a failed attempt to move above the mid-July high. Stocks attempted to move above this level also in early August, and they failed once again. Today's early decline suggests that the rally might be over.

Why is this important for mining stocks?

Because they moved lower substantially yesterday, while stocks moved lower just a little. So, if stocks are going to move lower in a really significant manner (and it's likely to happen either very soon or soon, anyway), then miners are likely to truly plunge.

As a reminder, the history is rhyming for junior miners and the action that followed the vertical, red lines are very similar. These lines were not placed randomly – they market the days when the nonfarm payroll statistics arrived below expectations. In both cases, junior miners first rallied, and then they formed important tops.

That was also the case recently, and the current decline is in perfect tune with what we already saw.

Yes, the economic / geopolitical situation is not the same as it was in April 2023 or in mid-2022, but it doesn't matter. What matters is that the statistics were below expectations. This is the key part, because missed expectations trigger similar emotions regardless of the statistics themselves. And since price moves are ultimately triggered by humans that are taking emotional (!) decisions (they might be good and justifying those emotional decisions with logic, but emotions always play a huge role in making decisions on average), the same patterns will continue to work over and over again.

Because neither fear nor greed nor other emotions will disappear regardless of which party wins elections, how high interest rates get, and so on. That's why applying technical analysis while making gold price forecasts makes sense now, and it made sense decades ago. And it will continue to make sense in the future.

What does history's tendency to rhyme tell us – gold investors – right now? That's we should brace ourselves for more turmoil this year, as soaring USD Index and declining stocks don't bode well for gold price's outlook. And in particular, the above combination is likely to drive junior mining stocks lower.

This, in turn, means that the huge profits that we recently reaped in the FCX recently are likely to be joined by massive profits from the current short positions in the junior mining stocks and in the FCX.

By

Przemyslaw Radomski

Contributing to kitco.com

Time to Buy Gold and silver

David

Gold declines by over $27 as hope diminishes of a rate cut this year

Gold spot and futures both declined by over 1% today as traders reacted to dollar strength and stronger yields on U.S. Treasuries. But that explanation lacks the complete backdrop to the multiple reasons why gold is trading under pressure today.

Market participants are reacting with extreme caution before the release of Friday's nonfarm payroll jobs report. Current forecasts are predicting that the report will reveal that 200,000 new jobs were added in July after increasing by 209,000 in June.

In a report today by Reuters, U.S. job openings hit more than a two-year low.

"U.S. job openings fell to the lowest level in more than two years in June but remained at levels consistent with tight labor market conditions, which could spur the Federal Reserve to keep interest rates elevated for some time. Labor market resilience was underscored by the third straight monthly decline in layoffs as employers hoard workers after difficulties finding labor during the COVID-19 pandemic."

This week's jobs report could be an underlying factor enticing some traders and investors to take profits ahead of the report.

A momentary pause from the focus on the Federal Reserve

Although last week's FOMC meeting statements and comments by Chairman Powell left many investors, analysts, and economists with more questions than answers regarding the future guidance as it pertains to the monetary policy of the Federal Reserve, it is widely believed that next month's FOMC meeting will not contain another rate hike. The most current information provided by the CME's Fedwatch tool predicts that there is an 82.5% probability that rates will remain unchanged after the Fed raised rates by ¼% at the last FOMC meeting.

While it is true that the Fed remained guarded about revealing too much information about their plans, Chairman Powell's statements were carefully worded but direct and to the point such as, "It's not an environment where we want to provide a lot of forward guidance".

As of 4:32 PM EDT, gold futures basis the most active December contract is currently trading down $27.40 or -1.36% and fixed at $1981.80. This after breaking a key psychological price point trading to an intraday high today of $2004.40, $0.20 above this morning's opening price. Gold is currently trading near $1978.30 today's intraday low.

While dollar strength is partially responsible for gold's strong selloff today it was certainly not the major component moving gold lower. The dollar is currently up 0.38% and the index is fixed at 102.015. Silver futures basis most active September contract declined by $0.54 and is currently fixed at $24.435

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and silver

David