Gold, silver slightly down as next U.S. inflation data point awaited

Gold and silver prices are modestly down near midday Wednesday. A firmer U.S. dollar index today is a negative “outside market” force working against the precious metals market bulls. Also, the near-term technical postures for gold and silver are still leaning bearish, which is inviting some of the chart-based traders to the sell sides. April gold was last down $3.10 at $2,041.00. March silver was last down $0.182 at $22.35.

U.S. stock index futures are weaker near midday. Bitcoin prices have soared this week and are presently trading above $61,000. Barron’s today reported bitcoin’s rise is due to better risk appetite in the marketplace, the big rally in the technology heavy Nasdaq stock index, and notions the Federal Reserve will lower U.S. interest rates later this year.

Today’s revision of fourth-quarter 2023 U.S. gross domestic product readings showed GDP up 3.2%, year-on-year, versus the initial reading of up 3.3%. The 4Q personal consumption expenditures) PCE price index was up 1.8%, year-on-year, versus up 1.7% in the advance report. The core PCE price index was up 2.1% in 4Q, compared to the advance reading of up 2.0%. Today’s GDP data was not a big markets-mover, as the numbers did not stray far from market expectations.

The bigger U.S. data point of the week is likely going to be Thursday morning’s personal income and outlays report for January, which also includes the PCE inflation indexes. The PCE price index in January is seen up 2.6%, year-on-year, while the core PCE price index is seen up 2.9% in the same period. Those forecasts are just slightly higher than the readings seen in the December report. It’s been said the Federal Reserve officials pay extra close attention to the inflation data in the personal income and outlays report.

Recent U.S. inflation numbers have come in a bit warmer than expected. Not hot, but still warm enough to likely have swayed the Federal Reserve into reckoning it will wait until the second half of 2024 to consider lowering interest rates.

The market to watch Thursday morning following the personal income and outlays report will be the U.S. Treasury futures markets. Immediately after the data is released at 8:30 a.m. EST, the Treasury bond and note futures markets’ price action will indicate what the marketplace thinks about the latest U.S. inflation data. Remember that Treasury futures prices move in the opposite direction of the more closely followed yields. U.S. T-Bond and T-Note prices have been trending down the past four weeks. That suggests Treasury traders suspect U.S. inflation data will continue to come in too warm to allow the Federal Reserve to lower interest rates this spring. So watch the U.S. Treasury bond and note futures markets

Wednesday morning. You can bet other market traders will have one eye on the bond markets right after the report. Remember the old market adage: “Bond traders are the smartest guys in the room.”

The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are near steady and trading around $79.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently fetching around 4.28%.

Technically, April gold futures bears have the slight overall near-term technical advantage. Prices are in a three-month-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the February high of $2,083.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at last week’s high of $2,053.20 and then at $2,061.00. First support is seen at today’s low of $2,033.40 and then at $2,025.00. Wyckoff's Market Rating: 4.5.

March silver futures bears have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the February high of $23.56. The next downside price objective for the bears is closing prices below solid support at the February low of $21.975. First resistance is seen at Tuesday’s high of $22.71 and then at $23.00. Next support is seen at today’s low of $22.245 and then at $22.00. Wyckoff's Market Rating: 3.0.

March N.Y. copper closed down 155 points at 381.25 cents today. Prices closed nearer the session low today. The copper bulls have the slight overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the January high of 394.70 cents. The next downside price objective for the bears is closing prices below solid technical support at the February low of 365.50 cents. First resistance is seen at this week’s high of 387.15 cents and then at last week’s high of 390.85 cents. First support is seen at 380.00 cents and then at 375.00 cents. Wyckoff's Market Rating: 5.0.

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

Tim Moseley

Growing alarm over U.S. debt: Why the Fed is 'Dr. Frankenstein's monster' that is part of the problem – Charles Payne

(Kitco News) – With the U.S. national debt surging above $34 trillion, many prominent investors and financial leaders are raising alarm over a looming crisis. Even Federal Reserve Chair Jerome Powell has weighed in expressing concern that U.S. debt is unsustainable. However, the U.S. central bank is a major part of the problem, according to Charles Payne, Host of Making Money on FOX Business Network and the author of ‘Unbreakable Investor.’

Powell issued his own candid warning on U.S. debt during CBS’s ’60 Minutes,’ criticizing lawmakers for effectively borrowing from future generations with their unsustainable fiscal policies and stating that it was time for “an adult conversation.”

“In the long run, the U.S. is on an unsustainable fiscal path,” Powell said on Sunday. “And that just means that the debt is growing faster than the economy … We're effectively borrowing from future generations … It’s time for us to get back to putting a priority on fiscal sustainability. And sooner's better than later.”

While weighing in on the U.S. fiscal policy might be controversial for Powell, the Fed is a big part of the problem when it comes to debt, Payne told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.

“It's a nice sound bite,” Payne said. “But the function of the federal reserve itself belies what he was saying. They've always been the biggest buyers of U.S. Treasuries, which facilitate this crazy nonstop spending on both sides of the political aisle. That's why he had free reign to speak about it. It wasn't like he was pointing fingers at anyone in particular.”

The important thing to understand is how the Fed plays a central role in all this, Payne added. “We're here at the precipice of this situation where [Powell] rightfully acknowledges that there's a problem, but to be quite frank, I don't see the Federal Reserve doing anything about it,” he said. “They play a role in all of this. They're not backing away from this role.”

On top of that, the Fed receives more power and responsibility almost every year. “I think the Federal Reserve is already far too powerful an entity, not truly responsible to anyone, not truly answering to anyone. It's part of the problem. He's pointed out a major problem. Unfortunately, he didn't underscore his part of the problem,” Payne explained.

Payne highlighted that the Fed has become the most powerful entity in the world in its ability to move domestic and even global economies. For more on Payne's insights on the Fed's role outlined in his latest book 'Unbreakable Investor,' watch the video above for details.

"The Federal Reserve is responsible for far too much. And who do they answer to? Realistically, who gets to fire Jerome Powell tomorrow? No one. I'm concerned that we've created this all-powerful entity, almost like Dr. Frankenstein's monster, and within that entity, people would be shocked to learn how left-leaning it is right now,” Payne said.

An organization that is supposed to be nonpartisan has become very political, and there are serious consequences that could come from that. “Overwhelmingly, they’re very liberal, left-leaningDemocrats. These are the folks that will take control of the most powerful entity out there," Payne said. “And I do believe it will be more politicized."

Payne also weighed in on whether he foresees a scenario with no U.S. central bank or one with diminished powers. For insights, watch the video above.

The U.S. ‘fumbled’ its reserve currency status: Accelerating de-dollarization and unsustainable debt levels

Quickly rising U.S. debt levels are becoming one of the top concerns among individuals like JPMorgan Chase CEO Jamie Dimon, who says the U.S. economy is heading toward a financial crisis due to escalating national debt.

Speaking at the Bipartisan Policy Center, Dimon cautioned of a looming "hockey stick" surge in debt, adding that if U.S. lawmakers don’t alter the current path of spending, there could be “rebellion” among foreign owners of U.S. government bonds. "It is a cliff, we see the cliff. It's about ten years out, we're going 60 miles an hour [toward it],” Dimon said.

Also, Tudor Investment founder Paul Tudor Jones warned that even though it may look like the U.S. economy is firing on all cylinders, there is a “debt bomb” under the surface. “We’ve got a 6% to 7% budget deficit. We’re fast-pouring consumption like crazy,” Jones told CNBC. “The only question is … when does that manifest itself in markets? It could be this year, it could be next year. Productivity may mask, and it might be three or four years from now. But clearly, we’re on an unsustainable path.”

This concern around debt could have serious consequences when it comes to the dollar as the global reserve currency, according to Payne. "There's no doubt that the dollarization trend is picking up. We have fumbled this gift, this responsibility of being the world's reserve currency. The only problem is there's no one else out there to take advantage of it right now, but that's not always going to be the case," he said.

Payne added that it was important to pay attention to big oil-producing countries, like Saudi Arabia, accepting payments for oil in currencies other than the U.S. dollar.

To get Payne’s timeline for when the U.S. dollar could permanently lose its reserve currency status and what can replace it, watch the video above.

What does it all mean for the stock market in 2024?

Payne also outlined what this macro environment means for the U.S. stock market this year.

For Payne’s precise stock picks and investment insights, watch the video above.

Kitco Media

Anna Golubova

Time to Buy Gold and Silver

Tim Moseley

Analysts abandon bear cave for bull run, retail traders stay balanced but bullish
 

Kitco NEWS has a diverse team of journalists reporting on the economy, stock markets, commodities, cryptocurrencies, mining and metals with accuracy and objectivity. Our goal is to help people make informed market decisions through in-depth reporting, daily market roundups, interviews with prominent industry figures, comprehensive coverage (often exclusive) of important industry events and analyses of market-affecting developments.

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Analysts abandon bear cave for bull run, retail traders stay balanced but bullish teaser image

With the seasonal boost of the Lunar New Year and Valentine’s Day in the rearview mirror, the gold market saw relatively little volatility in the price action this week. Spot gold spent much of the week trading in a $10 range between $2,020 and $2,030 per ounce, though the weekly chart looks more dramatic, as the low of $2,012.81 was set near the open during the overnight session on Sunday evening, while Friday afternoon saw a late push to the weekly high of $2,041.41.

The latest Kitco News Weekly Gold Survey showed Main Street holding steady with a relatively balanced but overall bullish posture heading into the final week of February, while Wall Street analysts abandoned the bear cave to gear up for another projected bull run.

Adrian Day, President of Adrian Day Asset Management, was among those who see further gains for gold next week. “After declining earlier on indications that the Federal Reserve would delay rate cutting after optimistic expectations, the market is now brushing off those issues,” he said. “The underlying fundamentals are positive and supporting gold.”

“I’m sticking with ‘up’ for next week,” said James Stanley, senior market strategist at Forex.com. “USD bulls had an open door after the CPI report last week but given the reaction to the Austan Goolsbee comment about not getting ‘flipped out’ about a single inflation print, that says to me that the Fed really doesn’t want to entertain hawkish policy options at the moment. It’s not really a single inflation print: Core CPI has oscillated around 4% for the past five months, but the fact that the Fed has talked this down is meaningful. And the market reaction so far seems to agree.”

“The other side of that is that the European Central Bank has been holding firm regarding rate cuts and given the large allocation of the Euro in the DXY quote, that could similarly keep pressure on the USD next week, which I expect to be a positive for Gold,” Stanley added.

Adam Button, head of currency strategy at Forexlive.com, took the opposite view of the Fed’s likely response to hot data. “If we get a few more upside economic data surprises, the Fed will start to lose its dovish bias,” he said. “If so, we could see significant declines in gold.”

“The biggest risk to gold right now is if we get hot inflation data again, because a lot of this move right now is safety buying, flight to safety, but also the expectations that there's rate cuts coming sooner than later,” said Bob Haberkorn, Senior Commodities Broker at RJO Futures. “The last monthly data that came out pushed those expectations back further, there's still talk of June, but maybe September.”

Haberkorn said gold has formed a nice base around 2000. “It’s gone through there a few times, but just the geopolitical risk that's possibly on the horizon, coupled with U.S. elections this year, and the expectations of the Fed, has kept gold at that nice support level of $2,000,” he said. “Any dips below there have been getting bought up pretty quick.”

He said that next week, the main things for gold traders to watch will be Treasury yields and the stocks. “The strength in the U.S. equity markets really put a cap on what gold could do this week,” he said. “It's risk-on environment here versus flight-to-safety buying. I think the headline PCE and any Fed speak next week on rate hikes and rate cuts is going to be the next main driver here. I expect gold to remain in this range into the next Fed announcement.”

Haberkorn believes the upcoming Fed speakers will remain consistent in their message. “If one of them does hint towards something with cuts sooner than later, that would be extremely beneficial for the gold bulls at this point,” he said. “But it's pretty impressive that gold has maintained $2,000 given the spot where our interest rates are at. It just highlights the fear that's out there in the world at this point that has strong demand across the board here for gold assets.”

This week, 11 analysts participated in the Kitco News Gold Survey, and Wall Street has done a near-total about-face on gold’s prospects from last week. Eight experts, or 73%, expected to see higher gold prices next week, while one lone analyst, representing 9%, predicted a price drop, and two experts, or 18%, expected gold prices to trade sideways during the coming week.

Meanwhile, 203 votes were cast in Kitco’s online polls, with Main Street maintaining the same basic distribution of views it had last week. 89 retail investors, representing 43%, looked for gold to rise next week. Another 52, or 26%, predicted it would be lower, while 63 respondents, or 31%, were neutral on the near-term prospects for the precious metal.

As the Fed’s key measure of inflation, Thursday’s PCE price index will be the highlight among releases next week, but there’s a full docket beyond inflation data. Markets will also be watching new home sales on Monday, durable goods orders and consumer confidence on Tuesday, Wednesday’s Preliminary Q4 US GDP report, pending home sales on Thursday, and ISM manufacturing PMI on Friday.

Darin Newsom, Senior Market Analyst at Barchart.com, sees the technical picture trending solidly green next week. “The short-term trend on April’s daily chart looks to have turned up,” he said. “Initial resistance could be at the recent high of $2,045.50. Beyond that the target is up at $2,061.30, then $2,083.20.”

“Gold rallied five of the past six sessions coming into today,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “The Dollar Index has also fallen in six of the last seven sessions before today.”

Chandler said he expects the dollar to continue to trend lower, as he believes the interest rate adjustment is nearly over. “The market has converged to the three rate cuts the median Fed dot pointed to in December,” he said. “The momentum indicators are turning up. I think there is scope for spot gold to trade toward $2050 in the week ahead.”

He noted that this month’s high near $2065.50 was set on Feb. 1. “Maybe we can see that on a soft employment report on March 8,” Chandler added. “That said, some demand for gold was reported from China, but with higher stocks, FOMO may see less demand for gold for Chinese investors.”

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, was looking at the upward move in gold markets on Friday.

“I think it might be risk-off,” he said. “We saw earlier in the week, and over the last couple of weeks, when Bitcoin really shot up, gold was really struggling, so I always look at gold versus the U.S. dollar, and then tier-two is gold versus Bitcoin, because when you have people that are looking to trade alternative assets, when they're risk on, they'll trade cryptos, and when they're risk off, they'll do precious metals.”

Cieszynski said gold’s move isn’t so much about people getting fearful, but just an easing of risk appetite now that we're past earnings season. “Every single major piece of news is now out,” he said. “With the Nvidia earnings, Cisco, all the big names have now reported results in the U.S., so we're really at the end of earnings season now. We don't have any of those things coming in to drive more risk appetite.”

He noted that if we see profit taking in the risk markets, that could be beneficial for gold. “I'll go bullish on gold next week,” he said. “It's not necessarily that there's a negative event, it's just a lack of events to keep the party going.”

Cieszynski said that while next week’s PCE report is important, markets tend to underreact to it. “PCE usually is seen as more confirmation,” he said. “I still think most mainstream people don't understand PCE, so they all go off and look at the other ones. In fact, the markets often willfully ignore it in favor of CPI. Whereas if you look at PCE, you can see a mile away what the Fed is going to do.”

Turning to the timing of the Fed’s pivot, Cieszynski said the Fed will actually want to deliver the first rate cut in June if the data allows it, and the timing of the election is a key consideration.

“If you're going to do three rate cuts quarterly, then you'll start at the end of June,” he said. “You'll do June, September, and December. That kind of says, ‘we're on a regular thing,’ and it keeps them away from the election.”

“If they go September, then you'd be talking about them trying to do a rate cut at the end of October, and that's not realistic. They're not going to do anything,” he said. “Let's put it this way: If they don't cut rates at the end of June, then you're looking at two rate cuts, not three, because you're not going to go July-September-November. You might go July-September-December, but they don't seem to like doing that anymore.”

Cieszynski emphasized that the move wouldn’t be about making markets happy, rather it’s about getting on a rate cutting path that works with the election calendar and aligns with their history.

“They don't want people going, ‘the Fed is on, the Fed is off, the Fed is on,” he said. “They don't want it, because that creates instability and undermines confidence. They don't want the Fed to be the wild card. As much as they say they're data-dependent, once they start a program, they try to be fairly consistent and not keep everybody guessing.”

Mark Leibovit, publisher of the VR Metals/Resource Letter, believes U.S. government manipulation is restraining gold’s strength, but foreign buyers are driving the price action regardless.

“Commentary had virtually no reference to government suppression of price,” he said. “Despite that, the physical market outside the U.S. is taking control from the COMEX. Adding to positions on manipulated shakeouts.”

And Kitco Senior Analyst Jim Wyckoff sees gold prices still stuck in their recent channel next week. “Steady and sideways,” he said. “Stiff technical support levels lie just below the market. Yet, there has been no fundamental catalyst to inspire the bulls to get more active on the long side.”
 

Sot gold last traded at $2,036.09 at the time of writing, up 0.58% on the day and 1.14% on the week.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

Gold Price News: Gold Drifts As US Jobless Numbers Fall

Gold prices edged slightly lower on Thursday, after US unemployment figures came in below market expectations, suggesting a slightly stronger economy and less pressure for a loosening of monetary policy.

Prices initially pushed higher to $2,035 an ounce in early morning deals, but it was downhill from the morning peak, with prices dropping as low as $2,020 an ounce by late afternoon.

US initial jobless claims figures were released Thursday showing that the number of people claiming unemployment benefits in the US fell by 12,000 to 201,000 in the week ending February 17, well below market expectations of 218,000, and marking the lowest unemployment level for five weeks.

US stock markets were also higher on Thursday, contributing to the bullish picture of the economy. Any signs of a stronger-than-expected economy tend to ease the pressure on central banks to cut interest rates, allowing more leeway to maintain a hawkish stance on monetary policy for longer. The prospect of an extended period of higher interest rates is bearish for gold because it raises the opportunity cost of holding non-yield-bearing assets like precious metals.

Looking ahead, the immediate outlook for macroeconomic data releases is light, although the markets may pay some attention to the German Ifo Business Climate figures for February due for release on Friday, providing a snapshot of the health of the EU’s powerhouse economy. Beyond that, eyes will be on Monday’s speech by ECB President Christine Lagarde for clues on the EU economy and the central bank’s monetary policy stance.

Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.

Time to Buy Gold and Silver

Tim Moseley