U.S. dollar weakens against euro, sterling in U.S. holiday trading

The euro and sterling rose on Monday against the dollar in a quiet trading session amid a holiday in the U.S., while global risk sentiment has improved.

With the U.S. markets closed for Independence Day, markets expected a light trading day, with major currencies gaining some ground against the U.S. dollar, which had climbed to a two-week high on Friday.

The euro rose 0.3% to $1.0457, but stayed barely above May's five-year trough of $1.0349. While sterling rose 0.5% to $1.2155 after hitting a two-week low of $1.1976 on Friday.

"Quiet trading to start the week is seeing the U.S. dollar weaken against most major currencies as it unwinds Friday’s gains while ignoring a modest risk-off tone in markets," said Shaun Osborne, chief FX strategist at Scotiabank.

Reports that the White House will announce an easing of some Chinese tariffs later this week in an attempt to dampen elevated inflation helped inject some optimism back into markets, "giving currencies an extra push against the U.S. dollar," Osborne added.

The Australian and New Zealand dollars, as well as the Swedish crown , rose on Monday after hitting two-year lows on Friday.

But amid fears of a global recession, the euro remained near a five-year low against the safe-haven dollar.

The war in Ukraine and its economic fallout, in particular soaring food and energy inflation, has been a major drag on the euro, which has weakened 8% against the dollar this year. The difference between the European Central Bank and the U.S. Federal Reserve response to higher inflation has also weighed on the euro. read more

Data on Friday showed euro zone inflation surging to another record, adding to the case for the ECB to raise interest rates this month for the first time in a decade. read more

Jeremy Stretch, head of G10 FX strategy at CIBC said he expected headwinds on the euro to persist as the ECB is set to hike rates on July 21 by "a mere 25 basis point".

"ECB action remains moderate when compared with a 75bps Fed hike," he said. "Beyond ECB monetary policy discussion, the primary European Union risk variable relates to the energy sector."

Safe-haven demand has kept the dollar elevated even if markets have scaled back some of their U.S. rate hike expectations. The market is pricing in around an 85% chance of another hike of 75 basis points this month and rates at 3.25% to 3.5% by year end – before cuts in 2023.

The U.S. dollar index eased 0.15% to 104.9, not far below last month's two-decade high of 105.790.

Looking ahead to the rest of the week, investors are awaiting publication of minutes from last month's Fed meeting on Wednesday and U.S. employment data on Friday.

Australia's central bank will meet on Tuesday and markets have priced in a 40 basis point (bp) rise in interest rates. The Aussie may not catch much of a boost if a hike of that size, or thereabouts, is delivered.

Reporting by Joice Alves. Editing by Jane Merriman and Chizu Nomiyama

Time to buy Gold and Silver on the dips

Tim Moseley

Gold/Silver -How to trade this bloodbath

The broad-based selling continued in the commodity markets this week, where "inflation worries" have shifted to "recession fears." Looking back through several trading journals of mine, I can tell you that volatility operates at its highest in a deflationary/recession-type environment. Financial conditions will continue to deteriorate until the Fed pauses/pivots dovish, with corporate profits, growth, and liquidity all strained simultaneously. The spillover effect will cause cryptocurrency, real estate, and tech companies to accelerate layoffs well into the fall.

Daily chart of 10-year Treasury yields

Cross-asset class correlations show a repetitive pattern in the markets where inflation expectations elevate when Crude Oil prices rise, causing yields to cycle higher, giving a boost to the Dollar, which puts slight pressure on the Gold market. This cycle was broken abruptly on Friday as traders recognized that if a recession comes to fruition, the most likely outcome will result in declining Treasury yields, giving way for liquidation in Gold with panic buying in the treasury market to lock in higher rates.

Daily Gold Chart

Copper, Platinum, and Silver faced a beatdown on Friday from multiple directions. General Motors reported that nearly 100,000 vehicles sat uncompleted due to supply chain issues. At the same time, ISM Manufacturing data in the U.S showed that new orders had contracted to a two-year low. Remember, industrial fabrication makes up the bulk of demand for these three metals. We expect them to make a substantial recovery once the Fed declares victory on inflation and pivots to stimulating the economy. Therefore, positioning in these metals needs to be considered long-term investments in extreme washouts like what we are seeing now. Any new positioning should be in December 2022 or into 2023 on futures contract purchases. If you have never traded Silver futures, we completed a new educational guide that answers your questions on how to transfer your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. Additionally, you will receive a free two-week trial to our flagship report, "The Morning Express," giving you critical levels of support in resistance in the Gold and Silver. You can request yours here: Trade Metals, Transition your Experience Book.

Our Strategy

We remain bearish, taking tactical shorts on U.S equities on any significant bounce targeting the Nasdaq and Russell 2000. The leveraged stocks that make up these indices are most at risk during a recession. We also maintain our bearish stance on crypto and traditional currencies such as the British Pound, Euro, and Yen. We are also bearish and targeting economically sensitive commodities such as Cocoa, Corn, and Soybeans on bounces. We maintain a bullish stance on China as it continues to stimulate its economy. Crude Oil should remain firm in the front months while weakening over time as we get deeper into the recession. Therefore, we will look at leveraged option bets to play a further correction. To help you identify different technical analysis formations, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold but can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.

By Phillip Streible

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Fed to err on the side of too many rate hikes – Why is gold at $1,800?

Markets are anticipating the Federal Reserve to err on the side of tightening, with Chair Jerome Powell admitting this week that the real mistake would be failing to get inflation under control.

Recession fears and the hawkish Federal Reserve triggered bouts of volatility this year – the S&P 500 had its worst half of the year since 1970, while Bitcoin saw its largest quarterly drop in more than a decade. For gold, however, it has been steady sailing, with the precious metal down just 1% since the start of the year.

Analysts believe the precious metal has done a "spectacular job" of storing value. But many are neutral on the precious metal until more U.S. data show inflation peaking and growth slowing.

The headline keeping many investors cautious this week was Powell stating that the U.S. central bank could take things too far and potentially risk a recession for price stability.

"Is there a risk we will go too far? Certainly, there is a risk. But it's not the biggest risk to the economy. The bigger mistake to make would be to fail to restore price stability," Powell said during a policy panel at the ECB Forum on Central Banking in Sintra, Portugal.

At the time of writing, August Comex gold futures were trading at $1,808.50, roughtly unchanged on the day.

Making gold harder to read were many investors rebalancing their portfolios for the second half of the year in light of rising recession calls, OANDA senior market analyst Edward Moya told Kitco News.

"There are some concerning calls from others that gold could be vulnerable to some further selling pressure here. That is if the dollar remains fairly supported," OANDA senior market analyst Edward Moya told Kitco News. "It is tough to assess the market's true views. We are seeing significant repositioning. But the outlook for gold should still be fairly sideways. Next week, there will be a lot of focus on whether or not we see any signs that Fed members are becoming more optimistic that inflation is cooling."

There are already signs that the slowdown is hitting the economy a little faster than many anticipated, Moya added.

"We really need to see data showing that inflation peak is in place. We are in a choppy period because that question won't be answered by one data point. We need to see a few reports. And you need to hear from corporate America, and right now, that is not the case," he said.

Since touching $2,000 back in March, gold has been stuck in the "sell the rallies" type of trading, Walsh Trading co-director Sean Lusk told Kitco News.

"The problem for gold is all the rallies are being sold because of how hawkish the Fed is. There is no love here for the precious metal when the economic outlook is so uncertain. Plus, there are different takes on whether inflation is peaking or not," Lusk said.

In this environment, gold and silver won't see a bounce for another couple of weeks. This is why Lusk is waiting for a better seasonal time frame when more physical gold is bought.

PIC

Gold prices remain down but making a move back to $1,800 as ISM manufacturing PMI falls to 53

"Mid-to-late July is where we could get some movement to the upside. During the second half of the summer and into the Labor Day weekend is when demand for physical increases," he noted.

For now, there is a risk that gold could tumble to the $1,780 suport level. If that fails, the precious metal is at risk of falling to $1,730 an ounce. This is the price floor where Lusk expects to see a move higher. "The $1,782 level is May's low. If we blow through that, the next target is $1,760 — the pre-Christmas low and then it is $1,730. That could be where we go until we see a bounce," he said.

Moya is watching the $1,785 an ounce level, citing significant support around that range. "If it gets uglier for gold over the next week of trade, it should have major support at $1,785, and that could hold as the dollar peak might be in place," he said.

Next week's data:

Tuesday: U.S. factory orders

Wednesday: U.S. ISM non-manufacturing PMI

Thursday: U.S. ADP nonfarm employment, jobless claims

Friday: U.S. nonfarm payrolls

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Other potential outcomes from quantitative tightening by the Federal Reserve

The Federal Reserve’s monetary policy composed of aggressive rate hikes in tandem with a balance sheet reduction is intended to achieve price stability through lower inflation. The Federal Reserve is assuming that it can effectively reduce inflation without creating a recession. While this is one possible outcome, at best achieving this goal will be exceedingly difficult, and at worst impossible to accomplish.

Russia’s invasion of Ukraine has had a profound impact on commodity prices, supply chains, inflation, and a steep contraction of global growth. The impact of Russia’s war is that the Federal Reserve can only impact core inflation resulting in no major real reduction of inflation and an economic contraction. Therefore, a key risk to the global economy is the possibility that inflation will remain persistent and elevated together with contracting economic growth, the definition of stagflation.

Currently, inflation globally continues to run exceedingly hot. Today the European Union reported that inflation hit a new record in June. Headline inflation in Europe came in at 8.6% YoY exceeding the inflation level of the United States which is at 8.3% (CPI reading for May). Inflation in advanced economies is currently at its highest levels recorded during the last 40 years.

Global growth rebounded to 5.7% in 2021, however majority of the global growth that occurred in 2020 and 2021 was supported by global fiscal and monetary policy accommodation. Because this accommodation has ended economic growth is expected to contract to 2.9% in 2022. More alarming is the high probability that global growth will continue to contract with little change in 2023.

Today the Brookings institution released an in-depth study about how “Today’s global economy is eerily similar to the 1970s,”. This study acknowledged that “the global economy is in the midst of a sudden slowdown accompanied by a steep run-up in global inflation to multidecade highs. These developments raise concerns about stagflation—the coincidence of weak growth and elevated inflation—similar to what the world suffered in the 1970s.”

This study sites that the current supply shocks occurred after the prolonged monetary policy accommodation led to pent-up demand in conjunction with the recent global supply shock in food and energy costs due to Russia’s invasion of Ukraine. According to the study the global economy faces challenges that are similar to the oil shocks that occurred in 1973 and 1979-80. The study concludes that just as in the 1970s the global economy could be thrust into a period of stagflation.

There are multiple possible outcomes from global central banks and the Federal Reserve’s monetary tightening. Their intended goal is to successfully reduce inflation and soft economic landing simultaneously. While this is the desired outcome, it will be the most challenging possible outcome to achieve. There is a real risk that their actions will lead to persistent and high inflation combined with economic stagnation.

If the global economy moves into a period of stagflation this will certainly create strong bullish undertones for gold prices. This can be seen in today’s price action in gold. Gold futures traded to a low last night of $1783.40 and is currently fixed at $1812.12 indicating a dynamic pivot and possible key reversal. We could be witnessing market participants focusing on the real possibility that the monetary policy of central banks globally will lead to stagflation rather than their intended goal of lowering inflation.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Gold, silver down as chart-based bears pressing their case

Gold and silver prices are lower at midday today, in a choppy, two-sided trading session. The significantly bearish near-term technical postures for both metals are inviting the speculators to play the short sides of the futures markets at present. Gold hit a six-week low and silver a two-year low today. August gold futures were last down $6.80 at $1,810.60. Gold prices are close to key chart support levels ($1,800.00 and $1,792.00) that if breached would likely set off heavy sell stop orders in the futures market. July Comex silver futures were last down $0.363 at $20.29 an ounce.

The U.S. data point of the day was the personal income and outlays report for May, including the personal consumption expenditures price index component of the report that is said to be the Federal Reserve’s favorite inflation gauge. The May CPE price index came in up 6.3%, year-on-year, with the core rate up 4.7% in the same period. In the April report, the PCE price index was also reported up 6.3%, year-on-year. Metals market bulls were briefly assuaged by the stable readings in the report, as many reckoned the numbers could have been worse, possibly prompting the Federal Reserve to be even more aggressive in its monetary policy tightening. Raw commodity traders, including metals traders, have taken a tack recently of being more worried about less consumer and commercial demand for commodities amid an economic recession—as opposed to the notions of higher inflation being supportive for raw commodity prices.

Bitcoin closes June down 40% and below $20k as markets see recession fears, contagion risks

Global stock markets were mostly lower overnight. U.S. stock indexes are lower at midday, on this last trading day of the month and of the first half of 2022. Reports said the S&P 500 is set to close out its worst half-year since the 1970s. Trader and investor risk appetite has receded late this week, following downbeat consumer confidence and GDP readings out of the U.S. this week. Fed Chairman Powell and ECB President Lagarde on Wednesday repeated warnings that their central banks will keep raising interest rates even if their economies slowed down. Recently, much of the marketplace has deemed economic recessions potential as superseding inflation worries, when placing their trades.

The key outside markets today see Nymex crude oil prices lower and trading around $107.75 a barrel. The U.S. dollar index is weaker in midday U.S. trading. The yield on the 10-year U.S. Treasury note is fetching around 2.9%. Yields have declined this week amid the increased concerns regarding a U.S. economic recession.

Technically, August gold prices hit a six-week low early on today. Bears have the firm overall near-term technical advantage and have gained power this week. Prices are starting to trend down on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the June high of $1,882.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,792.00. First resistance is seen at today’s high of $1,826.80 and then at Wednesday’s high of $1,834.90. First support is seen at $1,800.00 and then at $1,792.00. Wyckoff's Market Rating: 2.5.

July silver futures prices hit a two-year low today. The silver bears have the solid overall near-term technical advantage and gained more power today. Silver bulls' next upside price objective is closing prices above solid technical resistance at $22.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at today’s high of $20.705 and then at $21.00. Next support is seen at today’s low of $20.16 and then at $20.00. Wyckoff's Market Rating: 1.0.

July N.Y. copper closed down 550 points at 372.40 cents today. Prices closed near mid-range today. The copper bears have the solid overall near-term technical advantage. A four-week-old price downtrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at this week’s high of 384.30 cents and then at 390.00 cents. First support is seen at today’s low of 368.80 cents and then at the June low of 364.00 cents. Wyckoff's Market Rating: 1.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold, silver bulls squelched by firmer U.S. dollar

Gold and silver prices are steady to slightly lower in midday U.S. trading Wednesday. A rally in the U.S. dollar index at mid-week kept the precious metals bulls at bay. August gold futures were last down $1.20 at $1,819.90. July Comex silver futures were last down $0.136 at $20.67 an ounce.

The marketplace was closely watching a central bankers’ forum in Portugal that began earlier today. Speakers included Fed Chairman Powell, ECB President Lagarde and Bank of England governor Bailey. However, the markets did not show any significant reactions to the central bank officials’ comments.

Today’s downbeat U.S. final first-quarter gross domestic product (GDP) estimate that showed contraction of 1.6% gave the gold and silver markets a brief boost but those gains could not be held.

Global stock markets were mostly lower overnight. U.S. stock indexes are mixed at midday. Trader and investor risk appetite has pulled back at mid-week, following downbeat consumer confidence readings out of the U.S. on Tuesday and out of the Euro zone today.

Gold prices trading near session highs as U.S. Q1 GDP drops 1.6%

The key outside markets today see Nymex crude oil prices near steady and trading around $111.75 a barrel. The U.S. dollar index is higher at midday. The yield on the 10-year U.S. Treasury note is fetching 3.108%.

Technically,August gold futures prices scored a mildly bearish “outside day” down on the daily bar chart today. Bears have the overall near-term technical advantage. However, the recent sideways and choppy trading action at lower price levels is suggesting a market bottom is in place. Bulls' next upside price objective is to produce a close above solid resistance at the June high of $1,882.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at today’s high of $1,834.90 and then at this week’s high of $1,842.80. First support is seen at today’s low of $1,810.70 and then at the June low of $1,806.10. Wyckoff's Market Rating: 3.0.

July silver futures were down $0.136 at $20.67 in midday trading today and nearer the session low. The silver bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the June high of $22.565 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at $21.00 and then at Tuesday’s high of $21.355. Next support is seen at the June low of $20.545 and then at $20.42. Wyckoff's Market Rating: 2.0.

July N.Y. copper closed up 35 points at 377.75 cents today. Prices closed nearer the session high today. The copper bears have the solid overall near-term technical advantage. A four-week-old price downtrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at this week’s high of 384.30 cents and then at 390.00 cents. First support is seen at today’s low of 370.75 cents and then at the June low of 364.00 cents. Wyckoff's Market Rating: 1.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

An important bigger-picture perspective on gold

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) – An examination of the monthly continuation chart for nearby Comex gold futures is a classic example of why it’s important to look at the longer-term charts, in order to gain a critical over-the-horizon perspective on where a market has been and where it may be heading.

The monthly gold chart shows prices are still not far below the record high of $2,078.80, basis nearby futures, scored in March of this year. Prices have pulled back from the record high, but not a lot, by longer-term historical standards. Technical analysts call this price action a “downside correction” in an overall longer-term price uptrend that remains in place. Gold market bulls still have the firm longer-term technical advantage.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Market participant wait for two key reports this week; GDP and PCE

Analysts and investors are waiting for two critical government reports due out on Wednesday and Thursday of this week. On Wednesday the Bureau of Economic Analysis (BEA) will release its latest numbers on real GDP which will be followed on Thursday by the PCE for May 2022.

Concerns over a potential recession which will either be confirmed or negated by Wednesday’s GDP report. These concerns took both the dollar and gold lower today. As of 5:35 PM EDT gold futures basis, the most active August 2022 contract is trading $6.30 (-0.34%) lower and currently fixed at $1824 per ounce. The dollar lost 0.244 points today taking the dollar index to 103.715.

According to a report by Dr. David Kelly, Chief Global Strategist at J.P. Morgan asset management, “1Q22 Real GDP showed the economy contracted at a 1.5% annual rate in 1Q22, a deceleration from the boomy 4Q21. Weakness was primarily led by volatile trade and inventory data. Trade subtracted 3.2% from overall GDP growth as exports fell sharply and imports soared.”

The report also said that first-quarter 2022 earnings have held up better than expected. However, inflation continues to far exceed the FOMC’s 2% target with the May CPI report indicating hotter than expected inflation despite hopes by the Federal Reserve that it would moderate.

He concluded the following; first, the Federal Reserve could push the economy into a recession if it over-tightens in response to supply-driven inflation. Secondly, heightened geopolitical tensions with Russia could result in continued energy shortages, low consumer confidence, and dampening growth. Lastly, he concluded that markets may remain depressed and volatile until investors receive clarity on inflation and the Fed.

The other key report which will be released on Thursday is the PCE price index for May. The PCE for April revealed a slight uptick in core inflation increasing by 0.2% month over month. However. This was a decrease from the increase in March which came in at a 0.9% increase in MoM.

Although we will have to wait until Thursday for the official PCE price index from the BEA, last week they reported that “The U.S. current-account deficit widened by $66.6 billion, or 29.6 percent, to $291.4 billion in the first quarter of 2022, according to statistics released today by the U.S. Bureau of Economic Analysis. The revised fourth-quarter deficit was $224.8 billion. The first-quarter deficit was 4.8 percent of current-dollar gross domestic product, up from 3.7 percent in the fourth quarter.”

August gold opened at $1839.60 today and traded to a high of $1842.80. Today’s high was $1.10 below the 200-day moving average which is currently fixed at $1843.90. This puts the first level of resistance in gold at the 200-day moving average. Above that, there is resistance at $1850.40, the highest value gold achieved in trading last week. Our technical studies indicate that major resistance is currently at $1882 which corresponds to the highest value of gold achieved this month on June 13.

Strong support for gold does not occur until $1805 with major support at $1786.20. Both levels of support are based upon recent price lows.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Gold’s price floor has gone up – What this means for Newmont, the world’s largest gold miner – Tom Palmer

Tom Palmer, CEO of Newmont, said that gold’s price floor has increased considerably over the past decade, making mining more lucrative as a result.

“We think, fundamentally, that the floor for gold has changed,” he said. “You typically have seen it sitting, probably for the last decade, at around $1,200 as a floor. I think the events of the last couple of years have changed that: the level of fiscal and monetary stimulus, the factors that are happening around Russia’s invasion of Ukraine. Gold is more comfortably, I think, sitting with a floor of maybe $1,500 or $1,600.”

Palmer spoke with David Lin, Anchor and Producer at Kitco News, at the PDAC 2022 Convention in Toronto.

Newmont’s Costs and Revenues

Newmont’s cost guidance this year is $1,050 per ounce of gold. This assumes an $1,800 price per ounce of gold.

“Built into that [cost guidance] number are the higher taxes and royalties that you pay at that higher price,” Palmer explained. “If gold’s price were to come down, then you’re paying less taxes and royalties, so they’re coupled to each other.”

U.S. inflation was 8.6 percent in May, and Newmont is taking this into consideration, said Palmer.

“We’re starting to see some additional cost pressures coming into our business,” he said. “And we talked about it being about 5 percent over and above that number we guided to. We continue to watch that carefully… If we look further into the future, in probably 2024 we would see inflation coming down to long-run levels of about 2 to 3 percent.”

In terms of higher oil prices, Palmer explained that Newmont’s base assumption is $60 per barrel, and that every $10 increase per barrel reduces his company’s cash flow by $15 million.

However, he added that, “every $100 increase in gold price above the assumption that we make, means we generate $400 million of free cash flow every year… I talked earlier about our $1,800 assumption. [Gold] has spent a lot of this year at $1,900 to $1,950.”
 

Drivers of Gold Price

Palmer identified key supply and demand factors behind gold’s price.

“For gold, there are less discoveries taking place, so there’s less gold that’s going to be produced going forward,” he said. “And then there’s demand. One of the big demands for gold is jewelry in China and India. A growing middle class in both of those countries leads to greater demand for gold… I think you’ve also seen more of a move to gold as a safe haven, as a result of the volatility over the last couple of years.”

To find out Newmont’s plans for explorations and discoveries, and its ESG strategy, watch the above video.
 

By Kitco News

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold holds above a key support level in light of rising interest and yields

Gold continues to trade in an extremely narrow range as the precious yellow metal reacts to two opposing forces; rising interest rates and inflation. However, the recent price declines in gold have been shallow and short-lived at best. Most importantly, gold prices have held above a key support level which is Fibonacci based. The data set used for this Fibonacci retracement set contains a long period of data. It begins at $1678 which is the low created in August 2021, up to this year’s highest value of $2077. This data set covers a price range of approximately $400.

Chart number one is a daily chart of the continuous contract of gold futures. It currently is representing the most active August 2022 contract. After hitting this year’s high in March what followed was a deep correction moving gold from $2077 to $1785. Gold dropped a total of $292 or 15.12% in approximately 2 ½ months. This correction was directly attributable to market participants' focusing on dollar strength the result of rising interest rates and yields.

What followed after gold hit $1785 was an initial rally up to $1881 finding resistance at the 50-day moving average and then correcting to approximately $1807 before forming a base and regaining some value.

Chart number two is a daily candlestick chart of gold which has been enlarged to detail the most recent price activity. Today gold traded to a low of $1830.70 which is $0.10 above the 61.8% Fibonacci retracement. It is widely recognized amongst technical traders that a deep acceptable correction will typically go to the 61.8% Fibonacci retracement and begin to move higher reigniting the rally which occurred before the correction.

If gold can hold above the key support level of $1830 it will find minor resistance at the 200-day moving average which is currently fixed at $1843.20. Above the 200-day moving average, the next resistance level gold could encounter if it continues to rise from this price point is approximately $1860 which is the high achieved on both Thursday and Friday of last week. Major resistance is currently fixed at $1872.60 which is based upon the shortest term 50-day moving average.

If gold futures can hold $1830 it will either form a foundation at this price point and consolidate, or start a new rally from this base. With the next FOMC meeting scheduled for the end of July, market participants will prioritize their focus on inflation. If inflation continues to run hot, we can expect to see gold move to higher pricing. However, if inflationary pressures begin to abate, we could expect to see gold continues to be pressured resulting in lower prices. I believe that inflation will continue to run hot and continue to be not only persistent but elevated.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley