This is the next big catalyst for gold price

Gold is looking at its third consecutive week of losses after January's rally, which saw its best start to the year in over a decade. And now all eyes shift to next week's U.S. inflation report, with analysts saying it could be the next big catalyst for the precious metal.

After surging to $1,975 an ounce last week, April Comex gold futures are now trading at $1,870.70 an ounce, down 5.3% from that peak.

"The dollar is reverting, and the Fed remains hawkish, which is weighing on gold," RJO Futures senior market strategist Frank Cholly told Kitco News.

Gold's bullish sentiment began to change after a strong employment report out of the U.S. last week showed job gains of 517,000 in January.

This was followed by Federal Reserve Chair Jerome Powell confirming markets' worries that if the U.S. economy continues to surprise on the upside, the central bank would be forced to raise rates higher than anticipated.

Powell brought out just the right amount of "Fed speak" when he appeared at the Economic Club of Washington, D.C., Tuesday. On the one hand, he reiterated that the "disinflation process" has begun. On the other hand, he warned that if data continue to come in stronger, the Fed will move peak rates higher.

"It really fits well with the definition of what we often call Fed speak, which is a strategy by the chairman of the Fed to speak out of both sides of their mouth so that the markets get both signals," Gainesville Coins precious metals expert Everett Millman told Kitco News. "The hope is that things remain steady and both sides have something to latch to. That's exactly what Powell did. The most likely outcome here is that the Fed continues along its rate hike path until the economy falters."

What to watch with the CPI report

Next week, the gold market is gearing up for a number of key macro releases. Tuesday's CPI report is the one to watch as it could be the next big catalyst for the precious metals space, TD Securities senior commodity strategist Daniel Ghali told Kitco News.

"We need a substantial catalyst for subsequent selling activity to ensue in gold. It could come in the form of next week's CPI data. At the same time, if the CPI won't be a big enough shock, gold won't see a lot of selling activity into next week," Ghali described.

Even if the CPI report continues to show slowing inflation, the Fed won't be ready to take its foot off the gas yet, said Cholly. "Gold has a little more downside," he said.

Market consensus calls are projecting annual inflation to slow to 6.2% in January from December's 6.5%.

"We think that inflation will fall by more than the consensus, which should give a lift to commodity prices as it will allay fears of a more hawkish Fed and higher U.S. interest rates for longer," said analysts at Capital Economics.

Ghali also pointed out that a large cohort of investors still sees gold as overvalued, but it is unclear who would be willing to sell based on the flow perspective.

The recent central bank gold buying has supported gold, and the market is waiting to see if that trend will continue.

The participants that have driven the gold rally above $1,800 have been central banks and short-covering, Ghali said. "If that trend continues, then I would feel more comfortable with gold holding above $1,800," he noted.

The World Gold Council amended its Gold Demand Trends report this week, stating that central bank gold buying was at a record high in 2022, with 1,136 tonnes purchased.

Gold price levels

Gold's potential trading range is pretty wide at the moment, with strong support currently at $1,800 an ounce and resistance at $1,900, Ghali noted.

Cholly is looking at the $1,850-$1,855 range. "Moving averages are important. We are sitting at a 50-day right now. And the 200-day is at $1,812. Somewhere between these two marks, there is market equilibrium. Gold will consolidate and recover from those levels," he said.

Key data next week

Other data to keep an eye on include U.S. retail sales, the Producer Price Index, and industrial production.

"January activity data is going to be strong throughout. The contrast between the weather in mid-late December, where it was incredibly cold, versus a very mild January, couldn't be more stark," said ING chief international economist James Knightley. "This means there will be delayed consumption, plus better weather means more people out and about, which in all likelihood will lift January spending. We already know auto sales were very strong and that will lift retail sales mightily on its own."

Tuesday: U.S. CPI

Wednesday: U.S. retail sales, N.Y. Empire State manufacturing index, U.S. industrial production

Thursday: U.S. PPI, U.S. jobless claims, U.S. housing starts and building permits, Philly Fed manufacturing index

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Investors wait for CPI numbers but the bearish sentiment remains on Fed’s narrative

Gold investors had a wake-up call last Thursday when gold futures hit $1974, the highest value of 2023. But that same day also marked the beginning of a correction. Gold would lose approximately $90 per ounce over last Thursday and Friday.

This week started with a whimper with gold trading to a higher high and higher low on Monday, Tuesday, and Wednesday. However, each day had fractional gains and through the eyes of a Japanese candlestick chart were identified as spinning tops which always have a small real body (the rectangle drawn between the open and closing price of a trading session). While gold prices did have gains it was obvious that this strength was tepid at best.

On a technical basis, gold was attempting to find support at the 38.2% Fibonacci retracement level which is considered an acceptable but shallow correction. The caveat though is that gold as well as the financial markets at large have been headline driven based on the latest comments of Federal Reserve officials.

In December the Federal Reserve released its most current economic projections and “dot plot” which contained the anticipated rate changes by the Federal Reserve as 17 Federal Reserve members placed their opinion (as a dot). December's projections of interest rates in 2023 contained the stark realization that unanimously voting members of the Federal Reserve anticipated taking the current benchmark rate higher with the goal of just over 5% and maintaining those elevated rates throughout the entire calendar year of 2023.

The elevated hawkish tone reflecting expected actions by the Federal Reserve began to factor into the current pricing of precious metals, US treasuries, and stocks. A faction of market participants continues to believe that there would be rate cuts this year contrary to what the Federal Reserve’s narrative was and continues to be. However last week’s announcement by the Federal Reserve was that they might have to take rates to a higher target closer to 6%. This most likely is what prompted the selloff at the end of last week.



Thursday was the only day this week in which gold prices closed below the opening value and today’s action resulted in a fractional decline of roughly $3.30. As of 4:45 PM EST, the most active April futures contract is currently fixed at $1875. Silver also has been trading under pressure for the better part of this week with the most active March contract attempting to hold pricing at $22 per ounce. Currently, March silver futures are fixed at $22.01 after factoring in today’s decline of just over $0.12 per ounce.

Dollar strength was certainly a strong component providing moderate to strong headwinds as dollar strength characterized today’s action. The dollar index gained 0.37% in trading and is currently fixed at 103.49.

Investors are waiting for the next report on headline inflation vis-à-vis the CPI next Tuesday. They are hoping to gain better insight into possible pivots by the Federal Reserve concerning their rate hikes. The most important takeaway of price action over the last few weeks has less to do with any technical indicators and more to do with the event-driven news based on the current narrative of the Federal Reserve.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

Uncertainty wanes as investors accept the resolve of the Fed

For the most part, the uncertainty that defined market sentiment has pivoted to a sense of clarity about the future forward guidance of the Federal Reserve. It has become clear that the Federal Reserve will make good on its commitment to continue rate hikes and sustain those higher levels throughout this entire year. Any doubt in that the Fed would back off from its current strategy has diminished. Simply put, reality has finally set in that the Fed's words were not just rhetoric but a warning to investors that they plan to put into motion what Chairman Powell first announced on August 25 last year at the Jackson Hole economic symposium.

Jerome Powell’s keynote speech was meant to warn the American public to brace as they would begin an aggressive and hawkish process to bring inflation back down to their 2% target.

“Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. The burdens of high inflation fall heaviest on those who are least able to bear them.”

That message fell on deaf ears and was not taken seriously. Both individual citizens and corporations disregarded this message and continued to run business as usual.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.”

Six months after this announcement market sentiment was still under the belief that the Federal Reserve would back down and not implement the hawkish steps needed to restore price stability. Investors continued to base their decisions on the belief that the Federal Reserve would not make good on this commitment. Slowly market sentiment moved to a stance of uncertainty rather than doubt but that has now changed over the last couple of weeks.

The unfounded optimism diminished, as clarity of the upcoming steps by the Fed needed to be taken seriously. Finally, corporations and individual investors have accepted the reality that they need to brace themselves for an upcoming and continued restrictive monetary policy.

In regards to investors that have been bidding the price of gold higher, market sentiment has now incorporated the reality of higher rates that will remain throughout 2023. This most likely will take gold lower as more and more investors recognize the reality that the Fed will make good on the commitment “to do what it takes” to bring inflation down to their 2% target.

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Wishing you as always good trading,

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

Considering dollar strength gold’s fractional gains were more than respectable

After factoring in two days of dramatic price declines in gold resulting in a loss of just under $90 per ounce, the fractional gains were significant. The significance is in the fact that gold (futures and spot) pricing advanced at all with such a strong dollar.

The dollar gained 0.71% and the dollar index is currently settled at 103.485. As of 5:48 PM EST, gold futures basis the most active April contract is currently fixed at $1880.20 after factoring in today’s gain of $3.60. Spot gold according to the Kitco gold index (KGX) is currently fixed at $1867.40, a net gain of $3.10.

The best way to illustrate how today’s fractional gains were significant is to look at the effect of dollar strength and normal trading in spot pricing. Physical gold gained $3.10 in trading today and that does not tell the complete story.

Dollar strength caused gold to decline by $11.75. Normal trading without factoring in dollar strength or weakness actually took gold $14.85 higher. This is why a fractional gain of three dollars does not fully disclose the significance of gold’s upside move today.

Silver did have a slight decline losing $0.14 to dollar strength, losing nine cents due to normal trading and five cents due to dollar strength with spot silver currently fixed at $22.25.

Because today’s price advance in gold was accomplished in light of major headwinds the result of dollar strength we can say that gold effectively rebounded today even though it’s not evident by just looking at the price change. However, the gains in gold regardless of dollar strength could have been due to simply short covering with traders pulling profits on short-term trades rather than the initial accumulation of long positions. In other words, it is too early to tell if gold prices witnessed the first signs of prices pivoting back into a bullish demeanor.

Gold has gained so much value since November 3 that the two-day price decline of $90 last week was long overdue. The question of whether or not it has found a bottom and this correction concluded at a 38.2% Fibonacci retracement level, or has more downside potential will be revealed over time. The fact that we didn’t see a sharp decline today was welcome news for gold bulls and time will tell whether or not the current price correction has concluded or not.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

Gold's massive $50 daily drop is just a 'speed bump' in the 2023 outlook but be aware of more profit-taking next week – analysts

The gold market saw significant losses Friday as the precious metal dropped $50 on the day following a shockingly solid employment report out of the U.S.

The U.S. economy added a staggering 517,000 jobs in January as the unemployment rate dropped to 3.4% — the lowest level since 1969. This took many by surprise as market consensus calls were looking for just 185,000 new positions.

On top of that, the U.S. service sector beat expectations in January, rising to 55.2% after a contraction in December, according to the latest data from the Institute of Supply Management (ISM).

"Today's data irked the Federal Reserve, which was fairly confident about inflation trends. This service sector is still too strong. And it is going to keep wage pressures elevated," OANDA senior market analyst Edward Moya told Kitco News.

After raising rates at a slower pace of 25 basis points on Wednesday, Fed Chair Jerome Powell talked about disinflation progress. "It is gratifying to see the disinflationary process now getting underway," he said. "We can now say, for the first time, that the disinflationary process has started. And we see it really in goods prices so far."

However, Powell did acknowledge that the service sector is yet to feel a slowdown in inflation.

Before Friday's employment report, the markets were looking for the Fed to potentially end its hiking cycle in March, but that is now changing, and gold is reacting to that, noted Moya.

"This is very disruptive for the gold trade. The markets thought we were very close to the end of Fed tightening. And now, there is the question of when this economy will really weaken. This employment report was shockingly strong, and that suggests that wage pressures are not coming down any time soon," Moya added.

Gold plummeted Friday, with April Comex futures dropping to $1,875.70 an ounce, down $55 on the day and looking to close the week down 3.7%.

"There is a lot of data for markets to digest. And not just the employment report but the Fed's tone. The market wants to interpret Powell as dovish. But the Fed's reaction function will be difficult to predict. That's the main reason why gold has gone down," Gainesville Coins precious metals expert Everett Millman told Kitco News.

After the best start to the year since 2012, gold was due for some profit-taking, and with the latest developments, analysts said there might be more selling next week.

"The path of least resistance for gold is to move lower," said Millman. "Expect us to spend more time consolidating and trading sideways. Gold spent so little time trading between $1,800-$1,900 before this selloff. It quickly moved from $1,700 to $1,900. This is why gold will be testing a lot of these levels in $1,800s before the market has strong conviction again."

The immediate support for gold is $1,870 an ounce. If that doesn't hold, gold will test $1,850 and then $1,800, Millman pointed out.

However, the overall bullish outlook remains intact despite the short-term downtrend, noted Millman. "No matter what the Fed ends up doing, gold will perform well through the rest of the year. This is a short-term speed bump rather than a fundamental change in gold's outlook," he said.

One driver to watch in the first quarter will be central bank gold buying after the official sector purchased 1,136 tonnes — the most since 1967 in 2022, according to the World Gold Council's (WGC) data.

"This is a major theme supporting gold as an investment. We haven't seen that level of interest since the last financial crisis. That is an important thing to watch," Millman pointed out.

Next week's data

The event to watch next week is Fed Chair Powell's appearance at the Economic Club of Washington.

"If he fails to push back meaningfully against the market reaction, the implication would be that the Fed itself is relaxed with what the market is doing, which risks it pushing further in the direction of pricing future interest rate cuts," said ING chief international economist James Knightley.

Tuesday: Powell speaks

Thursday: U.S. jobless claims,

Friday: Michigan consumer sentiment

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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

Tim Moseley

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

Tim Moseley