Corrective price gains for gold, silver on short covering

Gold prices are a bit firmer and silver solidly up in early U.S. trading Friday. Short covering in the futures markets is featured after December gold hit a 6.5-month low Thursday. A lower U.S. dollar index and a dip in U.S. Treasury yields today are friendly daily outside market elements for the metals markets. December gold was last up $5.60 at $1,884.20 and December silver was up $0.519 at $23.26.

Asian and European stocks were mixed to firmer overnight. U.S. stock indexes are pointed to higher openings when the New York day session begins. The stock indexes are seeing corrective rebounds from recent selling pressure. Reads a Wall Street Journal headline today: "The 2023 stock market rally sputters in new world of yield.";

Today is the last trading day of the week, of the month and of the quarter. That makes it an extra important trading day for markets, from a technical perspective.

The clock is ticking at the month of September winds down and the U.S. Congress has not come to agreement to fund the U.S. government. A shutdown looks likely this weekend. This matter still has traders and investors more risk averse.

In overnight news, the Euro zone September consumer price index came in at up 4.3%, year-on-year, compared to the August reading of up 5.2%. The August CPI was slightly below market expectations.

  Gold's selloff doesn't change the long-term bullish outlook – Saxo Bank

The key outside markets today see the U.S. dollar index lower on a downside correction after hitting a 10-month high earlier this week. Nymex crude oil prices are higher and trading around $92.50 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.549%.

U.S. economic data due for release Friday includes personal income and outlays, advance economic indicators, the ISM Chicago business survey and the University of Michigan consumer sentiment survey.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at Thursday's high of $1,896.80 and then at $1,900.00. First support is seen at the overnight low of $1,879.60 and then at this week's low of $1,874.50. Wyckoff's Market Rating: 2.0

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at this week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at the overnight high of $23.345 and then at $23.50. Next support is seen at $23.00 and then at the overnight low of $22.815. Wyckoff's Market Rating: 3.5.

If you have not done so, I encourage you to try out my new "Markets Front Burner"; email report. I think it's one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It's a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Slight price rebounds in gold, silver on short covering

Gold and silver prices are just a bit firmer in early U.S. trading Thursday, after this week's solid selling pressure that drove December gold futures to a 6.5-month low Wednesday. Some tepid short covering in the futures markets is featured in both metals today. A lower U.S. dollar index today is also a friendly daily outside market element for the metals markets. December gold was last up $2.40 at $1,893.30 and December silver was up $0.081 at $22.805.

Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to narrowly mixed openings when the New York day session begins. Risk appetite remains dented as the U.S. government shutdown this weekend looms. The Associated Press reports: "As the Senate marches ahead with a bipartisan approach to prevent a government shutdown, House Speaker Kevin McCarthy is back to square one — asking his hard-right Republicans to do what they have said they would never do: approve their own temporary House measure to keep the government open." Goldman Sachs reportedly estimates the shutdown will probably last three weeks.

A Barron's headline today reads: "Forget the shutdown. Why stocks have plenty more to worry about." The story goes on to say the main reason for recent stock market declines is changing perceptions about interest rates. Now the thinking in much of the marketplace is higher for longer, maybe much longer, including potential stagflation, as pointed out by JP Morgan CEO Jamie Dimon in the press recently.

Striking union workers in the U.S., led by the United Auto Workers, are also starting to weigh more heavily on trader and investor sentiment.

  Gold could fall to $1,850 and then $1,800 after breaking below August lows

The key outside markets today see the U.S. dollar index weaker after hitting a 10-month high on Wednesday. Nymex crude oil prices are weaker and trading around $93.25 a barrel. A Dow Jones Newswires headline today reads: "Saudi Arabia and Russia win big in gamble on oil production cuts."

Meantime, the benchmark U.S. Treasury 10-year note yield is at a 16-year high this week and presently fetching 4.647%.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the third estimate of second-quarter GDP, revised corporate profits, pending home sales and the Kansas City Federal Reserve manufacturing survey.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,900.00 and then at $1,913.60. First support is seen at this week's low of $1,890.30 and then at this year's low of $1,883.80. Wyckoff's Market Rating: 2.0

]

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at this week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at Wednesday's high of $23.12 and then at $23.39. Next support is seen at this week's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0.

If you have not done so, I encourage you to try out my new "Markets Front Burner" email report. I think it's one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It's a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter .

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Time to Buy Gold and Silver

David

Gold, silver getting hammered by rising bond yields, strong greenback

Gold and silver prices are solidly lower in midday U.S. trading Wednesday, with December gold futures notching a 6.5-month low and dropping below psychological support at $1,900.00. An up-trending U.S. dollar index that hit a 10-month high overnight and a 10-year U.S. Treasury note yield that scored a 16-year high this week are bearish outside market elements for the two precious metals. December gold was last down $23.40 at $1,896.40 and December silver was down $0.381 at $22.815.

A still-hawkish Fed continues to squelch the metals market bulls. Today in my weekly “Front Burner" email report I mentioned respected JP Morgan CEO Jamie Dimon recently said the marketplace needs to be prepared for a 7% Fed funds rate in the coming months. The Federal Reserve's FOMC last week held the Fed funds rate steady, at a range of 5.25% and 5.50%. The present consensus of the marketplace is one more 0.25% rate increase, or maybe no more rate hikes at all. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%," Dimon said in an interview with the Times of India. Dimon added he is worried about stagflation setting in, whereby interest rates rise but economic growth stagnates. The JP Morgan chief is presently on the marketplace fringes in his thinking about much higher interest rates. However, I'm generally in Dimon's camp. Although the Fed funds rate may not reach 7% next year, I think the Federal Reserve remains stubbornly hawkish on U.S. monetary policy, which means there is a good chance for a 6% Fed funds rate or a bit more in 2024. That's a bearish scenario for the metals. (If you have not read today's Front Burner report, email me at jim@jimwyckoff.com and I'll forward that report to you. Just put “Front Burner" in the subject line. In today's report I provided forecasts for major markets' price action in the coming months.)

  Politics are behind spot Bitcoin ETF delays, BTC price to re-test record highs in the next 18 months – Mike Belshe

U.S. stock indexes are lower and hit multi-month lows today. Risk appetite is still dented at mid-week, as a likely U.S. government shutdown this weekend is weighing on marketplace sentiment.

The key outside markets today see the U.S. dollar index higher and hit 10-month high. Nymex crude oil prices are sharply higher, hit a 13-month high and trading around $93.75 a barrel. A Wall Street Journal headline today reads: “Quiet Western drills set stage for $100 oil." Meantime, the benchmark U.S. Treasury 10-year note yield is presently near this week's multi-year high and fetching 4.587%.

Technically, December gold futures prices hit a 6.5-month low today. Bears have the solid overall near-term technical advantage and gained more power today. A five-month-old downtrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,913.60 and then at today's high of $1,921.70. First support is seen at the February low of $1,883.80 and then at $1,875.00. Wyckoff's Market Rating: 2.0.

December silver futures bears have the overall near-term technical advantage. However, there are solid technical support levels just below the market that begin to suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week's high of $24.05. 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 $23.12 and then at $23.39. Next support is seen at today's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0.

December N.Y. copper closed down 115 points at 363.75 cents today. Prices closed near mid-range and closed at a four-month low close today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, seven-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 380.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 358.60 cents. First resistance is seen at Tuesday's high of 368.35 cents and then at this week's high of 370.55 cents. First support is seen at this week's low of 362.75 cents and then at 360.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold remains well supported as potential credit risk events drive safe-haven demand – MarketVector's Joy Yang

The gold market is trading near a five-week low as the U.S. dollar and 10-year bond yields consolidate at elevated levels; however, according to one market strategist, gold still remains an essential safe-haven asset.

In a recent interview with Kitco News, Joy Yang, global head of index product management at MarketVector Indexes, said that despite gold's lackluster performance, she doesn't see any significant shift from where gold started the year.

The comments come as gold prices look to test support at its August lows, just above $1,900 an ounce. December gold futures last traded at $1,919.40 an ounce, down nearly 1% on the day.

Although a resilient economy and persistently high inflation are forcing the Federal Reserve to maintain a "higher-for-longer" monetary policy, Yang said that uncertainty remains elevated and should keep safe-haven assets like gold well supported.

"Despite what the Federal Reserve has said, it's still not clear to me that we're headed for a soft landing," she said. "Investors are in a ‘wait-and-see' mode and that is why we have not seen any major momentum in gold."

In this market complacency, Yang said that investors are underpricing event risks. She pointed out that higher interest rates could make it difficult for consumers to weather any financial turmoil. She added that inflation risks are not going away as gasoline prices rise again and food prices remain elevated.

"Cash isn't as widely available as it used to be, and we are starting to see some cooling in the labor market," she said. "A lot of consumers will soon face some economic challenges, so I'm not optimistic that we will see a soft landing."

Yang said that while the U.S. economy has been resilient, it might not be able to withstand the global slowing trend. She noted that both China and Europe are seeing weaker economic activity.

She said that this uncertainty is helping gold prices hold long-term support above $1,900 an ounce, and added that although prices can go lower in the near term, it would not take a significant risk-off event to shift the momentum in the precious metal.

"I think gold is holding support at these elevated levels because it is positioning itself for some global macro risk event that may materialize despite the current strength of the U.S. economy," she said.

Yang said that one problem starting to creep back into the marketplace is the potential for another credit risk event as the Federal Reserve's aggressive monetary policies drive bond yields higher. Yang's comments come as U.S. 10-year bond yields push solidly above 4.5% to a fresh 16-year high.

While the current bond market selloff has been reasonably orderly, according to some economists there are growing risks that the bond market will become unanchored as U.S. debt continues to grow.

  Gold to hit $2k by end of 2023, reach $2,200 an ounce in 2024 as dollar weakens – SocGen

Late Monday, rating agency Moody's said that a government shutdown, as Congress has been unable to pass any funding bills, could threaten the nation's sovereign debt rating.

"A shutdown would be credit negative for the US sovereign," Moody's said in its report.

"In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability."

Moody's is the last of the 'big three' credit rating agencies that still gives the US a AAA rating with a stable outlook.

"There are still significant risks for the economy that investors just aren't pricing in," she said. "Gold is an attractive asset because we are not in a state where we can relax. There is still a real need for safe-haven assets."

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Some things are better, some stay the same – Lundin Group's Adam Lundin on mining gaining favor

Governments are more responsive but some organizational issues persist, said Lundin Group chair Adam Lundin when asked if mining is any easier due to the sector gaining favor due to energy transition.

Lundin spoke to Kitco mid-September at the Canadian Securities Exchange office in Vancouver, B.C.

The Lundin Group has a controlling stake in a number of miners and juniors, such as Lundin Mining, Lundin Gold and Filo. All are up sharply over the past year, countering a tough commodity market.

Governments in the Americas and Europe have been more supportive of mining to ensure a flow of critical minerals needed for electric vehicles. Lundin noticed some benefits.

"You can get access to government officials and people you need to talk to. That's extremely helpful," said Lundin. "At the same time I still find the U.S. very challenging when it comes to permitting. You have a bunch of agencies saying let's support the metals business, but they're not necessarily all talking with each other. It still takes time to get that permit."

Lundin is re-organizing the businesses geographically. Energy and renewable business will be run out of Geneva. Mining businesses will be located in Vancouver.

"What we're really trying to establish is a center of excellence," said Lundin, noting that business challenges can be tackled more effectively as a group. "It's easier when you're all in the same town."

Lundin said the junior sector is tough.

"I admire and respect everybody who wants to have a go at it," said Lundin. "It takes deep pockets, and if you miss the cycle, it can be tough. Make sure you cater to your shareholders and local communities. You can have success but obviously exploration is a challenging game."

Kitco Mining’s coverage of the Precious Metals Summit 2023 was sponsored by Newcore Gold.

  Lawrence Lepard, founder of Equity Management Associates, on why gold companies have performed poorly

By

Michael McCrae

For Kitco News

Time to Buy Gold and Silver

 

David

Economic risks supporting gold in neutral territory around $1,950

Federal Reserve chair Jerome Powell maintained his hawkish bias this week, saying that interest rates will have to remain in restrictive territory for the foreseeable future; however, the gold market remains firmly in neutral territory as uncertainty supports the precious metal.

Some analysts have said that gold has been able to withstand the Fed's posturing as risks for the global economy grow.

"Consumers are spending the last of their savings and higher interest rates will start to take their toll," said Ed Moya, senior market analyst at OANDA. "We think it's only a matter of time before we see a weaker economy, and that will not be good news for the U.S. dollar."

Heading into the weekend, December gold prices last traded at $1,944.90 an ounce, roughly unchanged from last Friday. Although gold is caught in a tight trading range, it has held firm against major headwinds as the 10-year bond yield pushed to a fresh 16-year higher at 4.5%. At the same time, the U.S. dollar is ending the week at its highest level since November 2022.

Ole Hansen, head of commodity strategy at Saxo Bank, said in his weekly commentary that economic uncertainty continues to support gold as a safe-haven asset.

"We conclude that the breakdown in normal correlations is likely due to a market in search of a hedge against the FOMC failing to deliver a soft as opposed to a hard landing, or even stagflation," he said.

Although gold is holding its ground, analysts have said it will be difficult for prices to rally in the current environment.

Carsten Fritsch, precious metals analyst at Commerzbank, noted that the rise in U.S. bond yields has pushed real yields 50 basis points higher compared to last month. He added that this is taking a toll on investment demand as investors liquidate positions in gold-backed exchange-traded products.

"Last week alone, they sold holdings totaling 16 tons," he said. "Holdings in the world's largest and most liquid gold ETF have meanwhile dropped to their lowest level since January 2020."

However, Fritsch also sees long-term bullish potential for the precious metal when sentiment starts to shift.

  Gold investment potential remains healthy despite Fed's hawkish stance – State Street's Milling-Stanley

"Net longs have plummeted by almost 75% within the past four reporting weeks," he said. "Against this backdrop, gold will doubtless find it difficult to come out of the defensive in the near future. That said, sentiment is now already so bearish that it wouldn't take much to spark a price recovery."

As for what could spark a new rally in gold, Daniel Ghali, senior commodity strategist at TD Securities, said investors should pay close attention to the data.

He added that disappointing GDP data will create fears that the U.S. economy could be in for a hard landing.

Markets will also be sensitive to further inflation data as the Personal Consumption Expenditures Index will be released on Friday.

Last week to visit a national park?

Along with economic data, some analysts have said that gold could attract some safe-haven demand as the U.S. government faces a potential shutdown as Congress has been unable to approve funding for the fiscal year starting Oct. 1.

Although a shutdown wouldn't impact the nation's sovereign debt, it would affect how it could conduct business domestically. Government employees would be furloughed.

Markets could be impacted as the Securities and Exchange Commission and the Commodity Futures Trading Commission would have to furlough most of their employees.

National parks and museums would also be closed during the shutdown.

Kristina Hooper, chief investment officer at Invesco, said that while economic growth might not be impacted in a short-term shutdown, it does increase uncertainty.

She added that it also brings attention to the United States' growing debt problem. The U.S. deficit has already exceeded $1.5 trillion in the 12 months to October of this year.

"Any concerns about the government's ability to handle its growing deficit is a positive for gold," she said.

Next week's data:

Tuesday: U.S. Consumer Confidence, new home sales

Wednesday: Durable goods

Thursday: Final GDP reading, weekly jobless claims, pending home sales, Jerome Powell speaks at Washington DC town hall event

Friday: Personal Income and Spending

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Gold is well-positioned for when the Fed breaks something

The gold market may not be able to break out of its neutral trading channel around $1,950 just yet, but it is well positioned to benefit when sentiment turns, which could be sooner than some are expecting.

Yes, the U.S. has been able to avoid a recession and expectations of a soft landing continue to grow; however, many analysts remain doubtful that this optimistic goal can be achieved.

For many analysts, gold’s price action proves that investors are taking a more cautious stance to protect themselves against a downturn.

Gold’s position is even more impressive when you look at what it faced this week. Although the Federal Reserve did not raise interest rates on Wednesday, it maintained its hawkish bias. Federal Reserve Chair Jerome Powell said that although the interest rates are close to a peak, the central bank will keep interest rates at restrictive levels for the foreseeable future.

He added that the central bank will only know when rates are sufficiently restrictive when they see it.

The biggest surprise for many economists in this week’s decision is that the central bank sees only two potential rate cuts next year, down from the four rate cuts projected in June. This fits the growing “higher-for-longer” narrative that is building.

The Fed’s stance pushed 10-year bond yields to a fresh 15-year high at 4.5%. At the same time, the U.S. dollar index pushed above 105 points to its highest level since November 2022. Analysts at Commerzbank noted that real yields have reached 2%, an increase of 50 basis points from last month.

Despite all this, gold continues to hold around $1,950 an ounce, which has become an important psychological level.

In an interview with Kitco News, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said that gold remains an important portfolio diversifier as the Fed continues to put pressure on the economy to cool down inflation.

  Economic risks supporting gold in neutral territory around $1,950

"At the start of the year, I said that equity markets have more to fear from the Fed than gold does, and I still believe that," he said. "Yes, the economy has been very resilient so far this year, but Powell said on Wednesday that they still need below-trend growth to get inflation down to the 2% target. Investors should believe Powell when he says that, because he means it."

And it’s not just the Federal Reserve that is entering the end game. The Swiss National Bank, the Bank of England, and the Bank of Japan also left interest rates unchanged this week.

Both the SNB and the BOE said that they are close to getting inflation under control as economic growth starts to weaken. Gold performed well against both currencies after their monetary policy decisions.

Although the gold market lacks momentum while investors sit on the sidelines, Milling-Stanley noted that there is still significant growth potential in the marketplace. This week State Street released an update to its gold investor survey published in June. The updated analysis looked at the role financial advisors can play in developing the gold market.

The survey showed that 20% of respondents said they held some gold. In further analysis, the report said that roughly one-third of investors didn't invest in gold because they didn't know enough about how to invest in the precious metal.

"The main message from the analysts is that the future of gold investment seems to be safe. That is very, very good news," said Milling-Stanley.

Finally, let’s not forget central bank demand continues to provide a solid base. Analysts at The World Gold Council reported that Russia’s central bank bought 3 tonnes of gold last month, and Russia’s gold reserves are now back to their 2022 levels.

That is it for this week, have a great weekend.

By

Neils Christensen

For Kitco News

Time to Buy Gold and silver

David

Gold prices holding around $1,950 as Powell remains hawkish, but markets see no more rate hikes

The gold market has given back some of Wednesday's gains and prices are testing initial support around $1,950 an ounce after Federal Reserve Chair Jerome Powell said the Federal Reserve is prepared to hold interest rates at an elevated level for longer than expected to get inflation back down to its 2% level.

In a much-anticipated decision, the Federal Reserve on Wednesday announced that it would leave interest rates unchanged in a range between 5.25% and 5.50%. However, Powell maintained his hawkish bias, saying that a rate hike is still on the table at either the November or December monetary policy meetings.

However, he added that monetary policies will have to remain restrictive for the foreseeable future regardless of one last rate hike. The central bank remains committed to bringing inflation down to its 2% target, he said.

"We are fairly close to where we want to be," Powell said in the press conference following the central bank's decision. "We need to see convincing evidence that we are reaching our goals. The worst thing we can do is not restore price stability. It would be a miserable period."

The question for many investors is how long will the Federal Reserve maintain interest rates at these elevated levels. Powell said that it is too soon to tell if rates are restrictive enough and have been for long enough.

"You will only know when rates are sufficiently restrictive when you see it," he said. "The time will come when it will be appropriate to cut rates, but we don't know when that will be."

Although Powell maintains his hawkish bias, the gold market appears to be taking the latest monetary policy decision in stride. Gold has fallen from its session highs, last trading at $1,952 an ounce, roughly unchanged on the day.

According to some analysts, despite Powell's hawkish posturing, gold is holding its own as markets see only a 50/50 chance of one more rate hike this year.

"Gold is holding up nicely despite a hawkish skip as the risks that the economy will break are growing. Higher for longer has been mostly priced in for gold, but eventually bad news for the economy will lead to safe-haven flows for gold," said Edward Moya, senior market analyst at OANDA, in a note.

 Rising debt and debased currency will push gold prices to record highs – AuAG Funds' Eric Strand

Paul Ashworth, chief North American economist at Capital Economics, continues questioning the Federal Reserve's stance as it increased its economic outlook for this year and 2024.

"If the Fed is right about the economic outlook, then rates can unquestionably stay higher for longer. We just don't believe those forecasts. The real economy will be considerably weaker and, regardless, core inflation is going to fall back to target much more quickly. Under those circumstances, we still expect the Fed to leave rates unchanged over the remainder of this year and to cut rate cuts by closer to 200bp next year," he said in a note following the central bank announcement.

Thomas Simons, economist at Jefferies, said that he also doesn't expect the Fed to raise interest rates anymore this year and sees potential easing in early 2024.

"We have not changed our expectations for policy based on today's Fed communication. We still expect that 5.375% will prove to be the terminal rate in this cycle, and that the Fed will have to cut more aggressively in the first half of 2024 than what is priced into the market (nearly a 30% chance of another hike at the next meeting), or described in their dot plot," he said.

By

Neils Christensen

For Kitco News

Time to Buy Gold and silver

David