Gold, silver pull back on profit taking and as USDX rebounds

Gold prices are lower and silver well down from its daily high in midday U.S. trading Thursday. Profit taking from the shorter-term futures traders is featured in both metals after gold hit a nine-month high and silver a four-week high overnight. A rebound in the U.S. dollar index today after its pounding Wednesday is also a bearish daily outside market element for the precious metals. Still, both gold and silver are in firm near-term technical control. April gold was last down $10.10 at $1,932.70 and March silver was up $0.036 at $23.65.

The marketplace Thursday was still digesting Wednesday afternoon's FOMC statement and Fed Chair Jerome Powell's press conference. The Fed raised the Fed funds rate range by 0.25%, as widely expected. However, Powell's remarks at his presser led the marketplace to believe the Fed is close to ending its string of interest rate increases. Powell said inflation is receding but needs to pull back farther. He mentioned the word "disinflation" as characterizing the present U.S. economic conditions. Most agreed that in the final assessment, Powell was not nearly as hawkish as he had been in recent FOMC press conferences and left the door open to a Fed "pivot" sooner rather than later.

Gold price gains as Fed Chair Powell talks disinflation but warns it's too early to declare victory

Today was the regular monetary policy meetings of the European Central Bank and the Bank of England, which saw both central banks raise their main interest rates by 0.5%. The moves were not unexpected.

Focus now turns to Friday morning's January U.S. employment situation report from the Labor Department. The key non-farm payrolls number is expected to be up 187,000 jobs, following a rise of 223,000 in the December report.

The key outside markets today see the U.S. dollar index higher but it hit a nine-month low overnight. Nymex crude oil futures prices are a bit firmer and trading around $76.50 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching 3.365%.

Technically, April gold futures prices hit a nine-month high early on today and then reversed course to score a bearish "outside day" down on the daily bar chart. Bulls still have the solid overall near-term technical advantage. A three-month-old uptrend is in place 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 $1,950.00 and then at today's high of $1,975.20. First support is seen at $1,925.00 and then at this week's low of $1,915.50. Wyckoff's Market Rating: 8.0

March silver futures prices hit a four-week high early on today. The silver bulls have the overall near-term technical advantage. However, trading has been choppy and sideways at higher levels. Silver bulls' next upside price objective is closing prices above solid technical resistance at the January high of $24.775. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $24.00 and then at last week's high of $24.415. Next support is seen at this week's low of $23.05 and then at the January low of $22.845. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 35 points at 410.75 cents today. Prices closed near the session low and hit a three-week low today. The copper bulls have the firm overall near-term technical advantage but are fading a bit. A four-month-old uptrend on the daily bar chart has stalled out. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the January high of 435.50 cents. The next downside price objective for the bears is closing prices below solid technical support at 395.00 cents. First resistance is seen at 420.00 cents and then at this week's high of 424.90 cents. First support is seen at this week's low of 410.25 cents and then at 405.00 cents. Wyckoff's Market Rating: 7.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver tread water just ahead of FOMC meeting

Gold prices are modestly down and silver slightly up in midday U.S. trading Monday. Gold is seeing a mild corrective pullback and a bit of profit taking from futures traders after prices last week hit a nine-month high, and just ahead of this week’s highly anticipated monetary policy meeting of the U.S. Federal Reserve. February gold was last down $6.00 at $1,923.40 and March silver was up $0.123 at $23.75.

The U.S. data point of the week is the Federal Reserve Open Market Committee (FOMC) meeting that begins Tuesday morning and ends Wednesday afternoon with a statement. Most believe the Fed will raise the key U.S. interest rate by 0.25%, following the recent 0.5% rate hikes. Trading in stock and financial markets early this week may be more muted ahead of the FOMC statement and press conference by Fed Chairman Jerome Powell Wednesday afternoon.

Global stock markets were mixed overnight. U.S. stock indexes are lower at midday, on downside corrections. Still, the U.S. stock indexes are in price uptrends on the daily bar charts and the stock index bulls have the overall near-term technical advantage.

 Stock markets are set to crash 37% as 'sucker's rally' ends, gold and silver to 'take off' – Chris Vermeulen

The key outside markets today see the U.S. dollar index firmer. Nymex crude oil futures prices are down and trading around $78.75 a barrel. Oil traders are awaiting an OPEC-plus cartel meeting this Wednesday. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching 3.557%.

Technically, February gold futures bulls still have the solid overall near-term technical advantage. A three-month-old uptrend is in place 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 $1,885.00. First resistance is seen at today’s high of $1,933.60 and then at the January high of $1,949.80. First support is seen at last week’s low of $1,912.50 and then at $1,900.00. Wyckoff's Market Rating: 8.0

March silver futures bulls have the overall near-term technical advantage. However, trading has been choppy and sideways for weeks. Silver bulls' next upside price objective is closing prices above solid technical resistance at the January high of $24.775. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $24.400 and then at last week’s high of $24.415. Next support is seen at Friday’s low of $23.39 and then at $23.26. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 310 points at 419.15 cents today. Prices closed nearer the session low today. Profit taking was featured. The copper bulls still have the solid overall near-term technical advantage. A four-month-old uptrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 440.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 400.00 cents. First resistance is seen at today’s high of 424.90 cents and then at last week’s high of 430.25 cents. First support is seen at last week’s low of 417.20 cents and then at 411.05 cents. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Will the Fed stop gold's run? Gold price sees longest weekly winning streak since the summer of 2020

Gold is looking to close Friday with its sixth weekly gain — the longest winning streak since the summer of 2020 when gold hit new record highs above $2,000 an ounce. But the question is whether the precious metal can maintain its rally as analysts see inevitable profit-taking in the short term.

One argument analysts raise for next week is why wouldn't gold investors take some profits off the table after seeing stellar gains this January.

Earlier this week, gold was up more than 6% year-to-date — the best start to the year since 2012 — as the precious metal hit a fresh nine-month high at around $1,949. At the time of writing, February Comex gold futures were last at $1,930 an ounce, up 0.10% on the week.

"With big data points coming in, the market will back off, and you will take profits off that table," Walsh Trading co-director Sean Lusk told Kitco News Friday.

The top event to watch next week is the Federal Reserve meeting on February 1, followed by central bank Chair Jerome Powell's press conference.

There is a lot of noise regarding the pace of rate hikes potentially slowing down, Lusk said. But the Fed could still surprise with a hawkish stance.

Markets are currently pricing in a 98.9% chance of a 25-basis-point hike next week, according to the CME FedWatch Tool. But Lusk is not ruling out a 50-basis-point move. "I don't think the Fed will be less aggressive as they are looking at the long term," he said. "With China opening up, there will be more demand. The Fed could keep its foot on the pedal here."

Lusk warned that a move below $1,917 an ounce could trigger a drop to $1,920, and then the market is at risk of re-testing $1,890 and $1,860 levels. "I wouldn't be surprised if we saw a wipeout. We had a big rally since early November," he said.

The market believes the Fed is close to being done, OANDA senior market analyst Edward Moya told Kitco News. However, with too much inflation in the system, the Fed could signal that more needs to be done. "The Fed is sticking to the dot plot — 25 bps, 25 bps, and 25 bps," Moya said.

The Fed's preferred measure of inflation — the core PCE index — told an interesting story Friday, Moya added. "It showed that annual inflation is still more than twice the Fed's target. And the month-on-month basis, it rose and snapped a streak of declines," he noted. "Gold will be a tough trade going into the Fed. And what it does after will be key."

Many analysts see gold as overbought at current levels. TD Securities noted that gold had been driven by massive Chinese purchases leading up to the Lunar New Year.

"Even more important than the Fed meeting will be the first signs whether massive Chinese buying is continuing post-Lunar holidays. This is one of the larger drivers for gold," TD Securities senior commodity strategist Daniel Ghali told Kitco News.

Longer-term, the majority of analysts are bullish on gold. "The upward trend is still intact," RJO Futures senior market strategist Frank Cholly told Kitco News. "I am disappointed the market hasn't managed to get above $1,966. We had quite a run, and the market is getting a breather," Cholly said.

Once gold can get above $1,966 an ounce, prices will shortly see the $2,000 an ounce level, Cholly added.

Data to watch next week

Another key event to keep a close eye on next week is the U.S. jobs report from January. Markets expect to see additional 185,000 positions added, with the unemployment rate climbing to 3.6% from 3.5%.

"Employment creation remains strong for now, but job lay-off announcements are coming in thick and fast," ING's chief international economist James Knightley said. "We expect to see a softer nonfarm payrolls increase than seen in recent months, but it is still likely to be well above 100k given the large number of job vacancies that remain."

Also on the radar next week are the European Central Bank and Bank of England monetary policy meetings.

Tuesday: U.S. CB consumer confidence

Wednesday: Fed meeting, U.S. ADP nonfarm employment, U.S. ISM manufacturing PMI

Thursday: ECB meeting, BoE meeting, U.S. jobless claims, U.S. factory orders

Friday: U.S. nonfarm payrolls, U.S. ISM services

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold declines in light of the report that revealed inflation continues to decline

As of 6:00 PM EST, the February contract of gold futures has fallen for the second time in the last seven trading days. Currently, gold futures are fixed at $1927.60, a decline of $2.40 or 0.12%. Gold traded to a high of $1935.40, and a low of $1916.50.

The key takeaway from today’s PCE inflation index report was that the core PCA index declined in December by 0.3%. The preferred inflation index used by the Federal Reserve was at 4.7% year-over-year in November and declined to 4.4% year-over-year last month.

Both reports will influence decisions made by the Fed at next week's FOMC meeting.

They will be critical components used by the Federal Reserve next week and will most likely strengthen the conviction of hawkish Fed officials to maintain their extremely aggressive monetary policy. Currently, the Federal Reserve’s forward guidance is composed of additional rate hikes and maintaining elevated rates for a longer time.

The most likely outcome is that the Fed will raise the rate by ¼% at the next two meetings. The Federal Reserve has stated they continue to work to reach its inflation target of 2%. A vast majority of market participants continue to believe that the Fed will backpedal on its commitment to keep rates elevated through 2023.

I will be speaking at the VRIC 2023 (Sunday, January 29-30) at the Vancouver Convention Center. Both Kitco News and I wish to welcome you if you're available.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold consolidating gains above $1900 into Fed week

The gold price is up over $100 in the first month of 2023, its best start to the year since 2012. After a false breakout to the downside during the final quarter of 2022, gold has zoomed $332 an ounce from its November low at $1618. This now 20% rally over the past three months has technically placed the safe-haven metal in a bull market, suggesting further gains ahead.

Since a triple-bottom in its monthly chart was completed in November, gold has advanced for five straight weeks and in 10 of the past 12. The safe-haven metal has virtually been a one-way trade, with every U.S. dollar and Treasury yield dip becoming an opportunity to bid bullion higher. And with the S&P 500 remaining entrenched in a bear market that began at the start of 2022, the gold complex has quietly outperformed stocks since its early Q4 2022 low.

Strategas Research Partners' technical and macro research team, headed by Chris Verrone, points out that this is the first time in the past 50 years that the S&P has lagged the gold price coming off a market bottom. From the March 2020 lows, stocks outperformed gold, rising 36.3% to the latter's 13.2% over the next three months. And from the December 2018 low, the gap was 20.6% to 2.1% in favor of U.S. equities.

The closest spread was from the October 1990 lows, when stocks rose 6.2% to gold's 1.7% in the subsequent three months. Gold's outperformance, relative to stocks, suggests that the expectations of future Fed easing are less than bullish for equities, and that smart money rotation into the gold space has quietly begun.

Gold Futures are beginning to resemble an identical trend seen during the first quarter of 2020, just before prices skyrocketed to new all-time highs. In February 2020, Gold Futures reached a low of $1626 an ounce, roughly the same level bullion hit in November last year. Three months later, gold prices have come just $51 from a headline attention grabbing $2000 per ounce on Thursday, despite Chinese gold markets being closed for the “Golden Week” holiday.

Moreover, daily trading volumes in CME's micro contracts for gold, which it uses as a proxy for retail activity, are currently up 93% year on year. That is almost three times higher than in 2020. This continued bullish momentum suggests a healthy pullback in overbought Gold Futures may not begin in earnest until the key $2000 level has been tested.

With policymakers being set to move forward with raising borrowing costs by 25 bps during the FOMC meeting next Wednesday, bond markets have been pricing in the move for weeks and Fed officials have not pushed back. Fed Chair Jerome Powell and his colleagues were also signaling a ¼ point raise in advance to avoid surprises before this week's official "blackout" period.

This morning's Personal Consumer Expenditures (PCE) index report for December showed core inflation rose 4.4% on the year, in line with economist expectations. Core inflation has dropped compared to November's rise of 4.7%, while core PCE is the Federal Reserve's preferred inflation gauge.

Fed-funds futures are pricing in a final quarter-point hike in March and a peak of 4.75% to 5%, while the most recent set of Fed projections from December point to a median fed-funds peak of 5.1% by the end of 2023. Yet, the sharp fall in bond yields has brought the benchmark 10-year Treasury down from 4.25% last October to 3.49% on Thursday, suggesting interest-rates topping at 5% with cuts starting later this year.

Over the past few weeks, the gold price has been sniffing an end to rate hikes by gearing up for its third attempt at the all-time high resistance zone as it approaches $2000. The third attempt at a major resistance level is typically not successful. But following a likely pullback from $2000-$2100, gold should make a fourth and successful break to new all-time highs. Once gold broke out above the psychological $1000 level after its fourth try in mid-2009, the price had nearly doubled by late 2011.

The $2000 level may then attempt to become the new floor, as opposed to very strong 13-year overhead resistance. On the downside, if support at $1900 is broken, there is more support at $1875.

A monthly close in Gold Futures above $1950 on Monday would be extremely bullish in the near-term, while an eventual break above $2100 would be a very bullish signal for the gold market in 2023, with targets of $2500-$3000.

Meanwhile, weakness continues to be bought in select quality junior gold stocks, with capital markets improving recently. There have been several bought-deal financings announced in the junior space this week, along with private placement activity heating up since the start of the new year as well.

The GDXJ closed above formerly strong resistance at $37 to begin 2023, which is a level that has become important support. On the upside, a back-test of the key $2000 level in gold would likely fill an open weekly downside gap in GDXJ at $45, which has become resistance. This gap in the Junior Miner ETF was created back in April, ushering in a devastating capitulation phase in a sector that remains deeply undervalued in relation to metals prices.

After a significant 7-year bottom was reached late last year, the mining complex is experiencing an impulsive rally with multi-day to multi-week sideways price congestions. Since bottoming last September, both GDX and GDXJ have had two such pullback/consolidations, between 5 to 8%, and have been currently experiencing a third for the past three weeks.

Once a $2000 per ounce gold price that has been strong resistance for over a decade becomes a floor, a speculative frenzy in junior mining stocks may already be in progress. Before this relatively tiny sector comes back into favor, it is best to accumulate full positions in select quality juniors on weakness ahead of the coming herd of momentum trader's and institutional investors.

Many of the best in breed junior gold stocks have been popping higher one by one from 4 to 6-month basing patterns since late Q4. During the second half of 2022, the Junior Miner Junky (JMJ) newsletter carefully constructed a concentrated portfolio of exceptional junior resource stocks with 3x-10x upside potential to hold for long-term gains during the current up-leg in the mining space.

If you require assistance in accumulating quality precious metals related juniors, and would like to receive my research, newsletter, portfolio, watch list, and trade alerts, please click here for instant access.

By David Erfle

Contributing to kitco.com

Time to Buy Gold and Silver

David

Questions arise about next FOMC meeting; will their decisions remain data-dependent

Exactly one week from today the Federal Reserve will hold the first Federal Open Market Committee meeting for the calendar year 2023. But before Federal Reserve officials meet for the first time this year on Friday, January 27 the government will release its latest data on inflation vis-à-vis the core PCE for December. Currently, the forecast for this week’s core PCE report is that inflationary pressures will continue to subside from 4.7% YoY in November to 4.4% in December 2022.

Inflation has been steadily subsiding as a result of the extremely aggressive monetary policy of the Federal Reserve which has been raising the benchmark “Fed funds” rate beginning in March 2022. The Federal Reserve had maintained its benchmark rate between 0 and ¼% for an extended time even though inflation in 2021 was spiraling out of control quickly approaching a 40-year high. Beginning in March the Federal Reserve raise rates by ¼%, the first-rate hike since 2018.

This was followed by a series of aggressive rate hikes that would define the second half of 2022. The Federal Reserve as they raised rates at each consecutive FOMC meeting from March to December. In May they raised rates by ½% and followed that with a series of ¾% rate hikes in June, July, September, and November. Finally, the Federal Reserve decreased the pace of hikes starting on December 2 by only raising them by ½ %. The totality of the actions by the Federal Reserve last year took the benchmark rate from between 0 and ¼% to between 4 ¼% and 4.5%.

It is widely expected that the Federal Reserve will continue its pivot by slowing the pace of rate hikes with a ¼% rate hike during the January FOMC meeting. The CME’s FedWatch tool currently is forecasting that there is a 98.1% probability that the Fed will raise rates by only ¼% and a 1.9% probability that the Fed will raise rates by ½ %. The Federal Reserve is also on record according to their most recent economic projections released in December of last year that they expect to take their benchmark rate just above 5% and not reduce that level for the entire year and possibly into the first or second quarter 0f 2024.

This raises many questions, the most important being whether or not the Federal Reserve will maintain this aggressive monetary stance in light of recent data that indicates that inflation in the US and globally has peaked and is decreasing every month. Global inflation came in at a six-month low in December but the Federal Reserve maintains that it is unlikely to reverse its hawkish bias.

Their hardline stance that they will keep rates elevated at 5% with no rate reduction in 2023 brings to question whether or not the Federal Reserve is still data dependent, and if they are will they maintain their rigid policy of no rate deductions this year regardless of what the data shows?

While declining levels of inflation allude that the hawkish monetary policy of the Fed with aggressive rate hikes is certainly behind us. The fact that the Federal Reserve is on record stating that they will slow the pace of rate hikes the question becomes; is there any point at which positive data on lower levels of inflation will cause them to backpedal on their stance of no rate reductions in 2023?

This is possibly the most important question on the minds of economists, analysts, and most importantly market participants.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David