Federal Reserve minutes reveal angst regarding ‘Upside Inflation Risks’

The minutes from the July FOMC meeting were released today. The document indicated that most Federal Reserve officials still believe that high levels of inflation are an ongoing threat and merit additional interest rate hikes. However, there was not an overall unison regarding the path forward in what can be best described as mixed messages amongst Federal Reserve members.

One of the primary takeaways was that members were divided over the question of further rate hikes. While most Fed officials were in favor of an increase in the terminal interest rate (Fed funds rate), some members believe that further hikes might take rates too high.

According to an article in The Wall Street Journal, “Minutes of the July policy meeting, released Wednesday, said some officials thought the risks of raising rates too much versus too little “had become more two-sided, and it was important that the committee’s decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening.”

A divided Federal Reserve reveals mixed messaging

Numerous mixed messages were revealed by Fed members. Although “most” senior voting members were in favor of a further increase in interest rates, there were a few notable dissenters to that view. Philadelphia Fed President Patrick Harker, a voting member said, “I believe we may be at the point where we can be patient and hold rates steady.”

In addition, presidents of both Boston and Atlanta federal banks revealed that they were in favor of a longer pause. Last week Susan Collins, President of the Boston Federal Reserve Bank said, “The risks of doing too much have increased and are much closer to balance, relative to the risks of not doing enough.”

Other Fed members expressed apprehension about the real possibility that underlying price pressures may prove to be more persistent as a direct result of a tight labor market. A tight labor market would allow workers to bargain for higher pay and that would make it more difficult to reduce inflationary pressures.

Also in an interview last week, Tom Barkin, President of the Federal Reserve Bank of Richmond expressed uncertainty that inflation could be moved to the Fed’s 2% target, “If the economy is softening as you would expect. If it’s not, then I do wonder about the policy path.”

Yesterday, Neel Kashkari, President of the Minneapolis Federal Reserve Bank reinforced the idea of more rate hikes when he said that the Fed “Is not ready to declare victory in the battle over high inflation.”

Overall, there is a consensus that the Federal Reserve will not raise rates at the next FOMC meeting in September. At the same time, according to the CME’s FedWatch tool, there is a one in three chance that the Fed will implement one more 0.25% rate hike this year. Since interest rate hikes this year have resulted in bearish market sentiment taking gold lower, today’s minutes will most likely continue that trend.

As of 4:30 PM EDT, gold futures basis the most active December contract is currently down $11.50 or 0.59% and fixed at $1923.70. Today’s price decline was based on a mixture of dollar strength and traders bidding the precious yellow metal lower. Currently, the dollar (DX) is up 0.26% and the index is fixed at 103.36.

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and silver

Tim Moseley

Gold continues to trade lower following a strong U.S. retail sales report

One could expect that the latest government report on retail sales revealing that they increased by 0.7% in July would garner a positive reaction in U.S. equities. However, it had the exact opposite effect taking all three major indices lower. This is because strong economic growth gives the Federal Reserve more latitude to continue to raise rates as they work to bring inflation down to its target of 2%.

Today, Neel Kashkari, President of the Minneapolis Federal Reserve Bank reinforced the idea of more rate hikes by the Federal Reserve this year when he said that the Fed “is not ready to declare victory in the battle over high inflation.” Kashkari made that comment in a discussion during the API Group’s Global Controllers Conference. He also added that “Inflation is coming down. We have made progress and good progress. I feel good about that. It’s still too high.”

According to an article in MarketWatch, “Kashkari, who is a voting member of the Fed’s interest-rate committee this year, said that given the recent positive signs on inflation, the Fed can take a little bit more time to get some more data before we decide to do more. The Fed is a long way away from cutting rates because core inflation is still around 4%.”

Kashkari framed his comments with a warning about not repeating the monetary policy of the Federal Reserve in the 1970’s saying he wanted to avoid repeating the experience.

Tomorrow market participants will gain more insight into the internal thought process of Federal Reserve members when the minutes from last month’s FOMC meeting are released. The Federal Reserve Bank of Atlanta released its latest estimate of GDP growth at 5% today. The Atlanta Fed uses a modeling system they developed called GDPNow, which is based on using available economic data for the current measured quarter.

The truth is that further rate hikes by the Federal Reserve will provide more bearish tailwinds for gold evident in today’s continued decline in gold prices. Gold has declined for the last seven consecutive trading days. Beginning on August 7 gold prices began a correction which has been characterized by a series of lower lows, and lower highs when viewed on a daily chart. On Monday, August 7 gold traded to an intraday high of $1991 almost $50 above today’s intraday high of $1944.30.

As of 4:50 PM EDT, gold futures basis the most active December contract is currently down $9.80 or 0.50% and fixed at $1934.30. The vast majority of today’s price decline was based on traders bidding the precious yellow metal lower with an extremely fractional loss from dollar strength. Currently, the dollar is up 0.06% taking the index to 103.12.

Gary S. Wagner

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and silver

Tim Moseley

The Gold market is stuck in neutral but there are still plenty of triggers

The gold market is stuck in neutral and could remain there through the rest of the summer as U.S. economic data continues to support the Federal Reserve's monetary policy tightening bias; however, analysts say that near-term weakness could be seen as a buying opportunity as the market waits for a new spark to trigger a broader rally.

While the gold market has been fairly resilient, with December gold futures holding support around $1,950 an ounce, analysts said that the precious metal still faces a challenging environment, especially as short-term bond yields continue to yield around 5%.

The gold market is seeing its second week of sharp losses. December gold last traded at $1,946.50 an ounce, down 1.5% from last Friday.

"Gold has a lot of competition as a safe-haven asset as the idea of a soft landing in the U.S. economy grows as consensus," said Edward Moya, senior market analyst at OANDA. "The long-term interest in gold is there, but this is going to be a tough environment. Gold will struggle until we see a market risk event."

Ole Hansen, head of commodity Strategy at Saxo Bank, said he also sees gold prices struggling as opportunity costs for holding the precious metal continue to rise. He added that investors are frustrated with holding gold as they liquidate their positions and move into equity markets.

He said that with the U.S. economy remaining fairly resilient in the face of the Federal Reserve's aggressive rate hikes, there is no urgency for investors to get into gold. He added that the gold market is waiting for the right trigger, which could take some time.

Analysts note that markets remain laser-focused on economic data as the Federal Reserve keeps its options open and remains data-dependent. The problem for traders and investors is that the data is still not providing any clear guidance.

This past week's Consumer Price Index shows that inflation is still well above the Federal Reserve's 2% target and looking ahead, some analysts are not expecting U.S. retail sales numbers to provide any new insight into personal consumption.

Analysts also said that the minutes from the Federal Reserve's July monetary policy meeting are also unlikely to provide any solid guidance ahead of September's decision.

Analysts have said that U.S. economic data has to turn decisively negative before interest rate expectations start to shift.

"CPI is still too high for the Fed to be relaxed about inflation for now. Higher carry, and opportunity cost make it very expensive to hold bullion," said analysts at TD Securities. "With gold currently trading at around $1,914/oz, we think that gold runs below $1,900/oz support (fib/200dma) from here, should data remain firm and inflation edge higher due to energy. Longer-term, however, positioning and likely aggressive action on the easing front, once data turns convincingly negative, should catalyze a robust rally which could take the yellow metal into $2,100/oz territory in late 2023-early-2024."

Sean Lusk, co-director of commercial hedging at Walsh Trading, said that despite the near-term challenges for gold, weakness should be bought. He noted that gold still remains well supported in the long term.

Aside from the economic data, the bond market is something that analysts are keeping an eye on, as higher volatility could be the spark that ignites a broader rally. While the U.S. bond market is not expected to see an immediate collapse, analysts said they are looking for cracks.

"At some point, investors need to realize that the government is printing too much money and once they do, gold will rally," said Lusk.

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

Hansen said that although the debt burden is not an immediate threat, it remains a significant reason why investors won't want to sell too much of their gold.

Concerns over U.S. debt levels started to grow after Fitch Ratings downgraded U.S. long-term debt. Those fears were sharpened this past week following a disappointing 30-year bond auction.

"This weak auction highlighted for the first time this week the structural issue that the market is struggling to absorb all the new debt sales/issuance," said Nicky Shiels, head of metals strategy at MKS PAMP. "At some point, the U.S. debt issue will matter for gold, but as long as the market plays for larger debt sales (read higher US yields), gold is just another proxy to short/sell.

Price levels to watch

Analysts note that the contango in the gold market, between December futures and spot prices, remains a risk in the marketplace. In this environment, some analysts have said that they expect futures markets will likely have to fall closer to spot prices as economic data has proven to be more resilient than expected, raising expectations that the U.S. will avoid a harsh recession this year.

Analysts have said that critical support in December gold futures comes in between $1,950 and $1,940. Michael Moore, the creator of Moore Analytics, said that gold is headed lower unless there is a decent break above $1,955.30 an ounce.

In the spot market, analysts are expecting gold to test support at around $1,900 an ounce, which also represents the market's 200-day moving average.

Next week's data:

Tuesday: U.S. Retail Sales, Empire State Manufacturing

Wednesday: U.S. Housing Starts and Building Permits, FOMC meeting minutes

Thursday: Weekly Jobless Claims, Philly Fed Survey
 

By

Neils Christensen

For Kitco News

Time to Buy Gold and silver

Tim Moseley

Bank of Canada finds little reason for Canadians to adopt a CBDC, RCMP wants a digital repository for seized crypto

An investigation conducted by the Bank of Canada (BoC) has found that the average Canadian sees little reason to adopt a central bank digital currency (CBDC), which could lead to problems with such a product being broadly accepted should the central bank ultimately decide to release a digital loonie.

The main focus of the investigation was on the scenario where “the emergence of a cashless society” could warrant the introduction of a general-purpose, cash-like CBDC in Canada

In the event that a cashless society emerges, the BoC determined that “most people, represented by the typical consumer and early adopters, would continue to have their usual payment needs met without cash by using various electronic methods” including digital and mobile wallets. “Technology-averse consumers would have access to fewer payment methods in a cashless environment but could continue to transact using debit and credit cards as well as cheques.”

The BoC made a point to stress that it is “committed to supplying cash as long as demand for it remains,” and “will not unilaterally stop supplying bank notes.”

“If the volume of cash transactions were to fall to a significantly low level, it would not be because of the Bank’s decisions,” the BoC said. “It would result from the cumulative behavior of most consumers, merchants and cash distributors (such as banks and other operators of ABMs) moving away from cash.”

In the scenario where the BoC issues a CBDC focused on providing payment services in a cashless environment, the bank determined that “A universally accessible CBDC that facilitated online purchases could benefit cash-dependent consumers,” especially those who are unbanked, as long as “their access to CBDC did not require a bank account.”

“Currently, most Canadian consumers do not experience gaps in their access to payment methods, and this will likely remain the case in a cashless environment,” the BoC said. “Some people could, however, face difficulties making payments if cash were no longer widely accepted as a method of payment.”

The report said that 98% of Canadian adults have a bank account, 87% have a credit card, and 90% of rural and urban households combined can access high-quality internet.

In order for a CBDC to serve as a cash replacement in a cashless society, it “would need to be widely adopted and used at scale by the dominant consumer groups who face few gaps in meeting their payment needs,” they said. “Such adoption and use would be necessary to motivate merchant acceptance, which, in turn, would encourage further consumer use and merchant acceptance.”

“However, the dominant consumer groups in this analysis may have relatively weak incentives for adopting and using a CBDC, so achieving widespread merchant acceptance could be challenging,” the BoC added.

“As a practical matter, achieving wide adoption, acceptance, and use of CBDC could be challenging because most Canadians have access to several methods of payment using commercial bank money, provided by sophisticated incumbents,” the BoC said. “Overcoming such barriers could require significant and sustained investment by the central bank.”

Instead of releasing a CBDC, the BoC outlined several steps that could be taken to help provide services to the underbanked, including improving internet access, expanding low-cost bank account availability, increasing merchant collaboration with remote communities, and continuing to supply cash.

  Canada's financial regulator updates guidance for crypto asset exposure

RCMP puts out the call for a digital repository for seized assets

In other blockchain news out of Canada, the Royal Canadian Mounted Police (RCMP) and Shared Services Canada (SSC) announced they are looking to develop a digital asset solution “to facilitate the seizure and storage of cryptocurrency and non-fungible tokens (NFTs) from multiple public blockchains.”

“With the rise of new and innovative methods to store and transfer assets, Canadian Law enforcement needs a safe and secure method to identify and seize said assets,” the RCMP said. “This challenge aims to leverage the private sector's innovation to develop a system used by the police to seize and store the ill-gotten gains from criminal activities.”

“The development of a centralized repository solution would allow police officers to seize these assets in a user-friendly manner, while also offering significant security to prevent the theft of said assets during their storage,” they added.

The RCMP listed 17 requirements that would be needed for such a repository, including the ability to process transactions for the top 20 cryptocurrency blockchains by market capitalization and the ability to scale to support new blockchains and NFTs in the future.

The proposed solution should also “Allow officers to query a public blockchain address and view balances and transactions; Present officers with clear instructions on how to seize assets through a step-by-step guide in the application; and Be able to accept and process transactions for the top 100 cryptocurrency blockchains by market capitalization,” RCMP said.

Submissions that receive a ‘Phase 1’ contract can receive up to CAD$150,000 and have 6 months to develop their product. Eligible businesses that successfully complete Phase 1 will be invited to submit a proposal for ‘Phase 2,’ which offers up to CAD$1 million in funding and allows 12 months to submit a final product. The RCMP estimates that it will accept four submissions in Phase 1 and two submissions in Phase 2.

“Final decisions on the number of Phase 1 and Phase 2 awards will be made by Canada on the basis of factors such as evaluation results, departmental priorities and availability of funds,” the RCMP said. “Canada reserves the right to make partial awards and to negotiate project scope changes.”

By

Jordan Finneseth

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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

Tim Moseley

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

Tim Moseley

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

Tim Moseley

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

Tim Moseley

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

Tim Moseley

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

Tim Moseley