Strong USDX, rising U.S. Treasury yields, stingy Fed punish gold, silver prices

Gold and silver prices are sharply lower near midday Monday. The safe-haven metals are being hit hard by a higher U.S. dollar index, rising U.S. Treasury yields and weaker crude oil prices to start the trading week. An aggressively tight monetary policy from the U.S. Federal Reserve is also serving as an anchor on the precious metals markets. December gold was last down $34.30 at $1,675.00 and December silver was down $0.61 at $19.645.

Global stock markets were mostly lower overnight. U.S. stock indexes are weaker at midday. U.S. government offices and many banks are closed Monday for the Columbus Day national holiday. Stock market traders will focus on a barrage of corporate earnings reports out this week.

Risk aversion is still elevated. The Russia-Ukraine war has escalated as Russia launched missiles into several Ukrainian cities after a strategic bridge for Russia in the Crimea region suffered major damage from explosions, with Ukraine’s military likely the culprit. Meantime, North Korea has test-fired ballistic missiles to provoke the West in an already-tense global geopolitical environment.

The short-squeeze won't last, silver price to end the year lower warns Metals Focus

The key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are weaker and trading around $92.00 a barrel. The U.S. Treasury 10-year not yield is presently fetching 3.9%.

Traders are looking ahead to key U.S. inflation reports on Wednesday and Thursday. The producer price index for September is out Wednesday morning. The consumer price index report for September is out Thursday, which is expected to come in at up 8.1%, year-on-year, following a rise of 8.3% in August.

Technically, the gold futures bears have the solid overall near-term technical advantage and gained fresh power on momentum today. Bulls’ next upside price objective is to produce a close above solid resistance at the October high of $1,738.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the September low of $1,622.20. First resistance is seen at $1,700.00 and then at today’s high of $1,707.40. First support is seen at $1,662.00 and then at $1,650.00. Wyckoff's Market Rating: 2.0

The silver bears have the slight overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $21.31. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at $20.00 and then at today’s high of $20.21. Next support is seen at $19.25 and then at $19.00. Wyckoff's Market Rating: 4.5.

December N.Y. copper closed up 560 points at 344.35 cents today. Prices closed nearer the session high today. 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 September high of 369.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the July low of 315.55 cents. First resistance is seen at 350.00 cents and then at the September high of 359.30 cents. First support is seen at last week’s low of 335.20 cents and then at the September low of 324.30 cents. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold and silver need more than a short squeeze

Precious metal analysts have been warning investors for a few weeks now that a sharp downtrend through the summer pushed gold and silver into oversold territory. Bearish sentiment in the marketplace is at its highest level in years, and both precious metals were ripe for a short squeeze.

Those forecasts proved to be correct, with silver seeing, at its peak, a 12% gain this week, as prices pushed above $21 an ounce. Meanwhile, the gold market saw a 4% rally as prices drove above $1,730 an ounce.

However, heading into the weekend, momentum is starting to wane as gold ends the week testing support at $1,700 an ounce and silver tries to hold on to $20. While this past week's rally has been a welcome move for some, analysts note that the market still lacks a critical ingredient: bullish investors.

Ultimately, the gold and silver market lacks solid bullish conviction to see a sustained rally for now. Many investors continue to sit on the sidelines as the Federal Reserve and the U.S. dollar dominate financial markets.

Despite the growing threat of a severe global recession, the Federal Reserve continues to aggressively raise interest rates, which is supporting the U.S. dollar at its highest level in 20 years. At the same time, bond yields are near 12-year highs. This is not a positive environment for gold.

These headwinds for gold are not expected to ease anytime soon. Even some market heavyweights are starting to embrace the idea of a strong U.S. dollar. Ray Dalio made headlines this week, announcing on Twitter that he no longer thinks cash is trash, a position he has held for a few years.

"The facts have changed and I've changed my mind about cash as an asset: I no longer think cash is trash," wrote Dalio. The following day Dalio announced that he would step down as Bridgewater's co-CIO

Last month, Dalio said that he expects the Federal Reserve to push interest rates to 4.5%, which will cause the S&P 500 to fall another 20%. In the current environment, the U.S. dollar is seen as the safest asset right now.

There is a growing divergence between physical gold and the paper market – WisdomTree

The reality is that gold continues to face a difficult environment and the volatility we have seen this week can frustrate many investors; however, one recurring message we keep hearing from market analysts is that investors need to look past this volatility and keep their eye on the larger picture.

The Federal Reserve is maintaining its aggressive monetary policy action in a vacuum. They are focusing on the domestic labor market and ignoring the impact that the U.S. dollar is having on the global economy.

While the U.S. economy has remained relatively resilient, the global marketplace is at a breaking point. Monday, the United Nations even stepped into the debate and warned that central bank rate hikes will push the global economy, particularly emerging nations, into a recession.

In its latest economic projections, the United Nations Conference on Trade and Development lowered its economic growth forecasts seeing global GDP expanding 2.5% this year, down from its previous estimate of 2.6%. At the same time, global growth is expected to slow to 2.2% in 2023.

The advice I am hearing from market analysts is that even as this short squeeze fails, the current price still represents long-term value.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

 How to interpret today’s jobs report, and what does it mean fo price of gold ?

Today’s jobs report for September showed a decrease in monthly gains, with 263,000 new jobs added last month, a decline from the prior month in which 315,000 new jobs were added.

The deep impact it had on almost every asset class in the financial markets was not because of the tepid numbers but rather hopes by the Federal Reserve that these numbers would be even lower. The Federal Reserve had hoped that today’s report would reveal even slower growth because that would indicate progress by the Federal Reserve in reducing inflation.

Inflation is still greatly elevated at a 40-year high even after the Federal Reserve has raised interest rates at every FOMC meeting since March. The Fed raised rates by 25 basis points in March, 50 basis points in May, and 75 basis points in June, July, and September. The Fed took their benchmark Fed funds rate from between 0 and 25 basis points in February to between 300 and 325 basis points in September.

Although today’s report indicated slowing job growth it is believed that this contraction is not enough for Federal Reserve to slow down its current pace of interest-rate hikes.

According to CME’s FedWatch tool, last week there was a 56.5%% probability, yesterday there was a 75.2% probability which today swelled to an 82.3% probability that the Federal Reserve will raise rates by 75 basis points for the fourth consecutive time at the November FOMC meeting. This probability indicator forecast the probability of FOMC rate moves by using the 30-day Fed Funds futures pricing data.

Today’s report had a profound effect on U.S. equities. As of 2:35 PM EDT, the Dow is currently trading off by 661 points a decline of 2.22%. The NASDAQ is currently down 3.75% a decline of approximately 415 points, and the S&P is down 106.16 points or 2.90%.

Today’s report also had a deep impact on gold pricing which opened at $1721 and then traded to a high of $1722.80 before the release of the report which took gold futures basis the most active December contract to today’s low of $1698.40. Gold futures did recover trading to approximately $1714 a few hours after the release of the report. However, as of this writing at 3:20 PM, EDT over the last hour gold has been trading between $1702 and $1706.

So, what does this mean for the future of gold pricing? I believe that although this report is extremely important in an exceedingly important data set that the Federal Reserve will use at their November 2 FOMC meeting, it will be next week’s CPI inflation report for September that will be much more significant. But in terms of the long-term effect of the Federal Reserve on gold pricing, it is highly likely that if the Fed continues to raise rates and inflation remains persistent at some point market participants will have to focus on the high level of inflation rather than being laser-focused on rising rates. If that assumption is correct, it could take gold dramatically higher. But it is also likely that there will be more pain ahead.

Our technical studies indicate that the first level of resistance occurs at $1710 the 23.6% Fibonacci retracement which is based on a very short-term Fibonacci retracement data set from September 28 to October 7. Major resistance occurs at $1738 the recent high of the rally which began after gold hit its lowest value in years at $1621. The first level of support occurs at $1693.80 the 38.2% Fibonacci retracement and then at $1689.40 a 42% retracement.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

The short-term future of gold’s price is tied to two upcoming reports

There is an adage when investigating a crime that says to “follow the money”. In the same way, when investigating where gold prices will be headed short-term it is wise to follow the upcoming reports. Two key reports will shape the short-term direction and price of gold. The first report is tomorrow’s jobs report, and the second report is the next CPI inflation report for September which will be released on October 13.

The forecast for tomorrow’s jobs report according to FactSet is expected to show an increase of 250,000 jobs being added in September which would be down from the 315,000 new jobs added in the prior month. Bloomberg’s predictions are close, forecasting an additional 260,000 new jobs were added in September. The Wall Street Journal is expecting that Friday’s jobs report will show that an additional 275,000 new jobs were added last month. In other words, expectations for tomorrow’s report are fairly aligned and in agreement.

If these various forecasts are correct, it would represent the slowest month of job growth since December 2020. However, analysts and economists will focus on whether or not the labor market is showing signs of contracting as a positive indication. In other words, in the case of tomorrow’s report, good news would be bad news for U.S. equities and gold. This is because slower growth in terms of jobs being added would help the Federal Reserve loosen its pace of rate hikes in its fight to bring down the 40-year high and inflation.

This week’s ADP private sector jobs report showed that 208,000 additional jobs were added last month. These numbers came in above expectations and forecasts. If tomorrow’s jobs report comes in above estimates it would harden the Federal Reserve’s resolve to continue to raise rates at an extremely rapid pace.

But the most important report that the Federal Reserve will use in their decision process about their monetary policy is next week’s CPI inflation report for September. It will provide clear-cut and undeniable evidence as to whether or not recent action by the Federal Reserve has begun to reduce inflationary pressures. Currently, the CPI inflation index is at 8.3% down 0.2% from the prior month’s 8.5%. However, the most recent data on the preferred inflation index of the Federal Reserve the PCE showed that inflation had a slight uptick from the previous month.

According to the CME’s FedWatch tool, there is a 68.7% probability that the Federal Reserve will raise rates for the fourth consecutive time by 75 basis points. This would take the fed funds rate which is currently at 300 – 325 basis points to 375 – 400 basis points on November 3, the final day of the November FOMC meeting.

For those who would like more information simply use this link.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley