Gold price rises as inflation looks to have peaked

The gold market is holding on to gains near session highs as inflation pressures look to have peaked, meeting economist expectations.

Wednesday The U.S. Labor Department said its U.S. Consumer Price Index rose 0.5% in July, after a 0.9% rise in June. The data was in line with consensus forecasts. For the year, the report said that headline inflation rose 5.4%.

Meanwhile, core CPI, which strips out food and energy costs, increased 0.3% last month, down from June’s 0.9% increase. The rise in inflation was weaker than expected. Economists were expecting to see an increase of 0.4%. For the year, core CPI is up 4.3%, the report said.

At first blush the weaker price pressure should be negative for gold, which is seen as an inflation hedge; however, the yellow metal is adding to its morning gains trading near session highs in initial reaction. December gold futures last traded at $1,746.60 an ounce, up 0.86% on the day.

Some markets analysts have said that although inflation pressures are weak, it gives the Federal Reserve room to maintain its ultra-accommodative monetary policies, which is supportive for the precious metal.

Adam Button, chief currency strategist at Forexlive.com said that the U.S. dollar is losing some ground as the latest data reduces some expectation of Fed tightening.

“If inflation falls back down to target without the Fed hiking rates, why would they need to hike rates?” he said.

Avery Shenfeld, senior economist at CIBC, said that although inflation “has seen the mountaintop,” investors should expect to see a sharp decent anytime soon.

“Looking ahead, a stabilizing in oil prices and a likely drop in used car prices at some point will help cool the headline inflation rate, but production bottlenecks and shipping delays remain as upside threats in upcoming months,” he said. “But the more important issue for the Fed is that solid wage gains this year, ample consumer purchasing power, and tighter labour markets come 2022, could keep core inflation from descending enough to achieve the roughly 2% core PCE price pace that it has penciled in for next year.”

Rising gasoline prices helped to contribute to a strong rise in energy prices. The report said that the energy index rose 1.6% with the gasoline index rising 2.4%.

By Neils Christensen

For Kitco News

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Gold, silver see upside price corrections after recent steep slide

Gold and silver prices are moderately higher in early U.S. trading Tuesday, on normal upside price corrections after the sharp losses suffered last Friday and on Monday. The precious metals bulls appear to have stabilized their markets—at least for now. October gold futures were last up $7.40 at $1,731.80 and September Comex silver was last up $0.166 at $23.435 an ounce.

(By the way, I was on vacation last week—leading a Jeeping expedition across the U.S. Continental Divide high in the Rocky Mountains. It was a great adventure. I know I have a good job at Kitco when I really did not mind coming back to work this week to serve you, my valued Kitco reader!—Jim)

Global stock markets were mixed but mostly firmer overnight. The U.S. stock indexes are pointed mixed to weaker openings when the New York day session begins. Markets are quieter Tuesday morning, amid the summertime doldrums, when much of Europe is on holiday and many North American traders and investors are taking family vacations. Traders will be closely parsing speeches by a couple of Federal Reserve officials today, Loretta Mester and Charles Evans, looking for clues on the timing and direction of U.S. monetary policy—especially after last Friday's much-stronger-than-expected U.S. jobs report. Separately, reports this week say the Biden Administration generally supports appointing Fed Chairman Jerome Powell to a second term.

Germany's close watched ZEW consumer sentiment survey showed a drop for the third straight month, and to the lowest level since last November, as a rise in Covid infection rates raises concerns over a possible tightening of pandemic curbs. The ZEW economic expectations index fell to 40.4 in August from 63.3 in July, with the institute's president warning of "increasing risks" to the German economy. The index of current conditions improved to 29.3 in August from 21.9 in July.

The key outside markets today see the U.S. dollar index firmer and hitting a three-week high overnight. Nymex crude oil futures prices are higher on a corrective bounce from recent strong selling pressure and trading around $67.50 a barrel. The yield on the benchmark U.S. 10-year Treasury note is presently fetching 1.316%.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and chain store sales reports, the NFIB small business index, and preliminary productivity and costs.

Technically, October gold futures bears have the overall near-term technical advantage amid the recent steep downdraft in prices. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week's spike low of $1,676.40. First resistance is seen at $1,750.00 and then at this week's high of $1,763.00. First support is seen at $1,725.00 and then at $1,700.00. Wyckoff's Market Rating: 3.5

The silver bears have the solid overall near-term technical advantage. Prices are in an 11-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing September futures prices above solid technical resistance at $25.00 an ounce. The next downside price objective for the bears is closing prices below solid support at this week's low of $22.295. First resistance is seen at the overnight high of $23.675 and then at $24.00. Next support is seen at $23.00 and then at $22.75. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff

For Kitco News

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Gold price well off its lows – Twitterverse sees drop below $1,700 as a buying opportunity

The price action in the gold market has turned from bad to worst as the precious metal dropped to a new low for the year at the start of the Asian trading session.

However, some analysts see the price action as a major buying opportunity as they expect central banks will be slow to tighten monetary policy.

December gold futures lost nearly $100 as Asian markets started to open up. Although the precious metal is well off its lows, it is still seeing some selling pressure. December gold futures last traded at $1,742.40 an ounce, down 1.17% on the day.

Since Friday morning, gold prices have lost $76, one of their biggest losses since markets were first roiled by the COVID-19 pandemic in early 2020. Better-than-expected employment data sparked the latest selloff in gold.

Friday, the U.S. Labor Department said that 943,000 jobs were created in July, handily beating consensus expectations of 870,000 jobs. At the same time, the unemployment rate fell to 5.4%, down from 5.9% in June. Wages also rose more than expected in July.

After gold's drop below initial support at $1,790 an ounce, many analysts said that gold could test major support at $1,690 an ounce. However, many weren't expecting that target to be reached by Sunday.

Some analysts have said that Sunday's major selloff was due to a massive sell order executed in a low volume environment.

"I think the idea that interest rates might have bottomed is causing some to want to dump their inflation bets in metals, which has led in Sunday evening thin trade to a washout," said Ira Epstein, director of Ira Epstein Division of Linn and Associates, in a note Sunday evening. "It looks like a firm doing a blowout of trade due to margin along with very thin trade volume is behind this."

According to comments on Twitter, many analysts see gold's drop as a significant buying opportunity.

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Already down $50, but August could still be ‘terrific’ month for gold

Already down $50, but August could still be 'terrific' month for gold

Just one week into August, and gold is already down more than $50. But can the last month of the summer still prove to be a "terrific" one for the precious metal?

Here's a look at Kitco's top three stories of the week:

3. August could be a "terrific" month for gold and a "tough" month for the S&P 500, says CNBC's Jim Cramer

2. Ray Dalio opts for gold versus bitcoin: 'If you put a gun to my head and said I can only have one, I would choose gold'

1. How much gold & silver is actually in Tokyo 2020 Olympic medals?

By Anna Golubova

For Kitco News

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Both gold and silver sustained major technical chart damage in trading yesterday

Immediately following the release of the U.S. Labor Department’s nonfarm payroll jobs report, we saw both gold and silver sell off sharply. Initial estimates by economists polled by Dow Jones were forecasting that July’s additional jobs would total above 800,000 individuals. While the vast majority believed that we would see a major uptick in the number of new jobs added last month, there were quite a few analysts that had the contrary approach believing that the actual numbers would come in well under expectation. Unquestionably, the majority of economists polled by Dow Jones were spot on in their forecast.

The net result of today’s selloff took gold pricing to the worst daily weekly slide over the last seven weeks. Aided by dollar strength and 10-year U.S. Treasury. Today’s extremely strong jobs report month certainly diminished the demand for precious metals and safe-haven assets as a whole.

Gold prices had been in a slow and methodical decline although trading in a narrow range it undoubtedly had a bias to the downside today’s action topped even the tepid declines witnessed this week in both gold and silver. The U.S. Labor Department reported that new jobs added in July showed a re-economy in recovery with an additional 943,000 nonfarm payroll jobs added last month. This came in well above expectations as analysts had predicted that 845,000 jobs would be the total number of jobs added last month. Economists also called for a downtick in the unemployment rate from 5.9% to an estimated 5.7%. Economists underestimated the actual number indicating that the unemployment rate had dropped to 5.4%.

With a solid indication that the U.S. economy is improving dramatically even though there are major issues such as a recent surge in the Delta variant of the Covid-19 virus which has plagued certain states in the country. This coupled with recent surges in inflationary pressure also could be highly supportive of the precious metal with one major caveat, that the Federal Reserve is not 100% correct in believing the vast majority of these recent inflationary pressures are transitory and will subside over time. While it is logical to understand while supply chain bottlenecks and many businesses lacking the proper staffing to fully operate their businesses, there are items such as energy and to a great degree food costs that could most certainly last longer than the Federal Reserve anticipates. In an interview with Kitco news Anna Golubova, RJO Futures senior commodities broker Daniel Pavilonis said that “This job number is bullish for the U.S. dollar and is pushing rates higher, which has an inverse reaction for

gold.”

This will certainly cause many precious metal analysts to rethink their current assessment and models as to the future price of gold. If the next jobs report is as robust as July’s report came in we could expect a real potential for the Federal Reserve to revamp and modify not only their timeline for tapering but their timeline for normalizing interest rates.

However, this could have an unexpected effect. If the Federal Reserve begins to taper much sooner than expected, and or raises rates in a timeline much more rapid than they have recently stated it could cause dynamic pressure on U.S. equities taking them lower and possibly even being the impetus that would cause the major indices would experience one of the first deep corrections in years. A correction is when an index or stock loses 10% of the value from the most recent highs. This could create a new incentive for market participants to reevaluate adding safe-haven assets to their portfolios to protect their capital.

By Gary Wagner

Contributing to kitco.com

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Gold and silver are mixed heading into the European open

Gold and silver are starting the session mixed on Friday. The yellow metal is trading at $1800/oz while silver has moved 0.10% higher to trade at $25.15/oz. In the rest of the commodities complex, copper trades 0.88% higher and spot WTI 0.61% in the black.

After a positive closed on Wall Street on Thursday, the Nikkei 115 (0.33%) and ASX (0.36%) both traded well overnight but the Shanghai Composite bucked the trend to move -0.27% in the red. Futures in Europe are pointing to a modestly positive open.

In FX markets, the dollar index is marginally higher and the biggest mover overnight was AUD/USD which fell just -0.13%. After closing 2.94% higher on Thursday BTC/USD failed to capitalize on those gains in the Asia Pac session.

Looking at some of the news stories from overnight, US Senate leader Schumer confirmed the infrastructure amendment process debate will recommence on Saturday.

Germany June industrial production -1.3% vs +0.5% m/m expected.

RBA Governor Lowe says the RBA does not need macroprudential tightening but it might be needed next year. He added a pick up in wages growth is gradual, in 2 yrs time still sees it under 3%.

Fed's Kashkari says the cryptocurrency market is akin to the "wild west", and is "full of nonsense". Speaking on the U.S. economy he added the economy is still in a deep hole, up to 9 million jobless.

The Chinese state planner says the nation will release the nation's commodities reserves that are essential for livelihood in a gradual and timely manner.

U.S. Democratic Senator Manchin has asked Fed's Powell to reverse easy monetary policy amid inflation worries.

The Union as the Escondida copper mine in Chile has asked workers to prepare to strike due to slow negotiations.

Looking ahead to the rest of the session highlights include the U.S. and Canadian NFP jobs reports, Canadian Ivey PMI, and comments from BoE's Broadbent.

By Rajan Dhall

For Kitco News

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David

Gold and silver move lower heading into the European open Gold and silver have moved lower overnight. The yellow metal is trading -0.20% lower at $1809/oz while silver lost around -0.40% to trade at $25.29/oz. In the rest of the commodities complex, there

Gold and silver move lower heading into the European open

Gold and silver have moved lower overnight. The yellow metal is trading -0.20% lower at $1809/oz while silver lost around -0.40% to trade at $25.29/oz. In the rest of the commodities complex, there is pretty much weakness across the board. Copper is -0.31% lower while spot WTI has also moved -0.68% in the red.

After a mixed close on Wall Street, it was pretty much a negative bais in Asia. The Nikkei 225 (-0.50%), ASX (-0.23%) and Shanghai Composite (-0.71%) all traded in negative territory. Ahead of the cash open in Europe futures markets are painting a mixed picture. The FTSE and EuroStoxx are negative while the CAC40 and DAX look firm.

In FX markets, the antipodeans were firm as both NZD and AUD strengthened against the U.S. dollar. There was also a mild bout of JPY strength as USD/JPY moved -0.18% lower. In the crypto space, BTC/USD declined again and now trades at $38,316.

Looking at the major stories from overnight, the RBA left its cash rate unchanged at 0.10% in the August monetary policy decision. The central bank announced no change to its QE/tapering plans for the time being, brushing aside the recent virus outbreak by saying that if it gets contained then the economy would be able to bounce back quickly.

China market regulator launches investigation on auto chip distributors.

Japanese officials say the COVID-19 hospital bed situation has become severe.

Fed's Waller concedes a tapering announcement could come in September.

Gaming stocks were hit in China as the government announced a crackdown on firms.

The RBNZ is now considering tighter lending as the housing market prices are above a "sustainable" level.

Wuhan city will now be conducting city-wide COVID-19 tests as some infections were found.

Looking ahead to the rest of the session highlights include EU PPI, Canadian manufacturing PMI, U.S. factory orders, and comments from Fed's Bowman and Clarida. SEC Chairman Gary Gensler, who has said he's no cheerleader for digital assets, is scheduled to speak about cryptocurrencies at the Aspen Security Forum.

By Rajan Dhall

For Kitco News

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David

Gold is trading marginally lower leading into the European open

Gold has kicked off the new week on the back foot. The precious metal is trading -0.33% lower but just above the $1800/oz psychological level. Silver is just marginally higher at the time of writing hovering at $25.50/oz. In the rest of the commodities complex, copper is trading close to $4.50/lb around 0.44% in the black and spot WTI has lost -0.75% after a few decent sessions.

Risk sentiment in the Asia Pac area has been positive overnight. The Nikkei 225 (1.82%), ASX (1.34%) and Shanghai Composite (1.88%) all traded higher. European futures are pointing towards a positive open.

In the FX space, the majors all traded within their ranges overnight, the dollar index trades at 92.08. In cryptocurrencies, BTC/USD has dipped just below the psychological $40k mark.

Looking at the news from the weekend and overnight, China Caixin Manufacturing PMI for July 50.3 (prior 51.3).

The China Daily noted that the Chinese government is set to intensify policy support to bolster the nation's economic growth.

Workers at BHP's Escondida mine rejected the company's final wage offer and if no deal is reached within the next 5-10 days strike action could resume once again.

Germany June retail sales +4.2% vs +2.0% m/m expected.

China has set up a $32bn fund to support State-Owned firms.

China has put travel restrictions in place for some areas due to rising new coronavirus cases.

US Infrastructure bill introduced onto Senate floor. The vote is expected to be completed this week.

Japan Jibun Manufacturing PMI for July 53.0 (prelim was 52.2, prior 52.4).

Australia – Markit Manufacturing PMI for July (final): 56.9 (flash was 56.8, prior 58.6). Australia – AiG Manufacturing PMI for July: 60.8 (prior 63.2).

Fed's Brainard says she would like to have the September jobs data at hand to assess improvements in the labor market.

Looking ahead to the rest of the session highlights include manufacturing PMI's from the major nations.

By Rajan Dhall

For Kitco News

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David

Gold surprises investors this week

Gold surprised many investors this week, rising to a strong resistance point of $1,830 an ounce following the Federal Reserve's interest rate announcement. Here's a look at Kitco's top three stories:

3. Gold price jumps back above $1,800 as Fed's Powell says the U.S. is ways away from 'substantial further progress'

2. U.S. Q2 GDP comes in well below expectations

1. Bitcoin jumps above $40K but here's why you should be paying more attention to ethereum

By Anna Golubova

For Kitco News

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David

Are gold stocks set for explosive growth like last summer? Yamana exec Peter Marrone on challenges, opportunities

With the challenges of shutdowns brought by COVID-19 largely behind us, miners can now focus on rebuilding production to maximum capacity.

Inflation now remains the biggest challenge to miners, said Peter Marrone, executive chairman of Yamana Gold.

“It seems to me that the challenge that is fronting this industry presently is inflation, and how to interpret it. Is it transitory, or does it have a stickiness to it? And on what, should we be concerned about as it relates to inflation, is it labor, or is it consumables?” Marrone told David Lin, anchor for Kitco News.

Marrone highlighted that while gold miners’ share prices have dropped this year, concurrent with the drop in gold, revenues and production have continued to grow. A compression of share price, coupled with growth in earnings before interest, depreciation and amortization (EBITDA), leads to more attractive valuations.

“If we apply any of the measures, if we apply multiple to cash flow, multiple to net asset value, our net asset value has gone up, our multiple to net asset value has gone down. Our multiples to cash flow…we’re trading at about five or six times cash flows, and normally in this industry, and certainly some companies in this industry, can trade higher than ten times cash flow. In other industries, they’re trading at higher than ten times cash flow, so I think there’s a lot of room for upside,” he said.

For more information on Yamana’s latest project updates, as well as Marrone’s outlook on the gold sector, watch the video above. Follow David Lin on Twitter: @davidlin_TV (https://twitter.com/davidlin_TV).

By David Lin

For Kitco News

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David