Crypto weekend meltdown: Bitcoin price touches $17k, Ethereum below $900 as renewed selloff sends prices spiraling

The crypto space faced another sharp selloff during the weekend as Bitcoin plunged below $18,000 and Ethereum dropped below $900.

The overall crypto market cap plummeted to $847 billion, down nearly 10% on the day. Bitcoin touched $17,677, the lowest level since November 2020, and Ethereum fell to a low of $893, the level last seen in January 2021.

"Bitcoin appears to be hanging on for dear life as cryptocurrencies remain in meltdown mode. The worst week since the early days of the COVID pandemic has widespread crashes across Bitcoin, Ethereum and Dogecoin," said OANDA senior market analyst Edward Moya.

At the time of writing, Bitcoin was at $18,633, down 74% from its November all-time high of $69,000, and Ethereum was at $948, down 81% from its November all-time high of $4,878. 

The initial trigger behind the massive crypto drop in June was the macro environment. First, a surprising hot inflation number from May caught markets off guard, followed by a 75-basis-point hike from the Federal Reserve on Wednesday – the biggest rate increase since 1994.

The dramatic shakeout in crypto also garnered steam following contagion risks from within the crypto community itself after a lending company Celsius said it was halting all transactions on its platform. To learn more about that, click here.

After failing to hold several key support levels, analysts now watch a price area below the $14,000 mark.

"Bitcoin is sharply lower today after having accelerated to the downside following the breakdown from its consolidation phase. It is currently down about 14%, bringing its month-to-date loss to about 44%," said Fairlead Strategies founder and managing partner Katie Stockton. "The breakdown is unconfirmed (it has not spent enough time below to make it decisive), but it shows the risk inherent to risk assets right now. If we see consecutive weekly closes below $18.3K, risk would increase to next support below $13.9K."

Stockton added: "We do not recommend counter-trend positions, however, noting momentum is strongly negative."

During the first two weeks of June, investors have continued to position themselves defensively, and crypto's upside potential remains limited until stagflation fears subside, said Bank of America's global crypto and digital asset strategist Alkesh Shah.

"Although painful, removing the sector's froth is likely healthy as investors shift focus to projects with clear road maps to cash flow and profitability vs. purely revenue growth. The digital asset ecosystem is an emerging high-growth speculative asset class with tokens that are exposed to similar risks as tech stocks. The upside is likely capped until risks associated with rising rates, inflation, and recession are fully discounted," Shah said.

By Anna Golubova

For Kitco News

Tim Moseley

Gold is doing 'spectacular job' but price drop to $1,800 not ruled out, here's why

Gold surprised this week with its resilience and steadiness after an oversized 75-basis-point hike from the Federal Reserve and massive volatility across many markets. But analysts don't see a major rally developing in gold in the short-term, and they are not even ruling out a move back to $1,800.

The precious metal's reaction to the Fed's decision to raise rates by 75 basis points — the biggest increase since 1994 — has been very encouraging. Fed Chair Jerome Powell also signaled that another 75bps is possible in July, adding that the so-called 'softish landing' will now depend more o external factors like commodity prices.

After digesting the information, the stock market saw a sharp drop, while gold rallied around $40 on Thursday. However, the rally was short-lived as August Comex gold futures retreated to 1,841.70 an ounce Friday, down 0.44% on the day.

"Gold's current relative stellar performance is surprising, as it usually tracks the Fed's policy rates and real interest rates intently," TD Securities global head of commodity strategy Bart Melek. "And, the market hiked its year-end Fed Funds expectation from 2.7% in mid-May to 3.6% now. At the same time, the 10-year real rate, which is the usual driver, jumped well over 50bps from a month earlier to 0.69% and some 180 bps higher from the start of the year."

The performance of gold versus that of other markets stands out, said Gainesville Coins precious metals expert Everett Millman. "Other markets you look at, even some safe havens like the U.S. dollar, have been remarkably volatile. Gold has had relatively low volatility. It is a sign of strength and gold doing its job — holding steady even amid turmoil across other assets," Millman told Kitco News.

Year-to-date, gold is largely flat, up 0.5%. Yet, Millman pointed out that this resilience does not mean a rally is just around the corner.

"We've seen gold rally nice and then pull back. I expect that to continue up until the next Fed meeting in July. Gold will be range-bound and stuck trading sideways until we find out whether the Fed will go through with another large rate hike," Millman said. "Rate hikes are supposed to be bad for gold. But when inflation is this high, it will take many rate hikes for the Fed to get to where the real rate of interest rate is neutral. And that is what gold cares about. Maybe next year, they will get there."

What's next for crypto after 'perfect storm' crashes prices? Ethereum's market cap is 'orders of magnitude higher' than Bitcoin — Messari

Throughout the summer, Millman sees gold between $1,800 and $1,900, with $1,840 flipping from support to resistance and vice versa.

He added that even though inflation remains one of the primary drivers for gold, growing recession risk could encourage some additional gold-buying if investors continue to fear losses in other assets.

Gold has been doing "a spectacular job," described Melek. But that doesn't mean the precious metal doesn't correct here and returns back towards $1,800. "It won't be a rout but a modest correction," he said.

The thinking behind Melek's projection is a persistent Fed, which won't give up aggressive rate hikes at the first sign of economic trouble. "My suspicion is that the Fed won't change its mind any time soon," he said. "It is very likely there will be many more aggressive hikes in the face of strong inflationary forces, which will likely send gold back to the May lows."

And that means a return to the $1,824-$1,808 range in the near term. "Still think we can go below $1,800 by the end of the year. It is too early to say that the Fed will flake at the first sign of trouble. Could be in a situation where growth starts to slow, but we won't see a significant move in inflation until September or October."

Data to watch next week

Out of all the macro data on the docket for next week, housing will be a vital element to keep a close eye on. The key thing to watch is the impact of the Fed's higher rates on the economy, including the housing market, said ING chief international economist James Knightley.

"With the Federal Reserve signaling it has a strong stomach for the fight against inflation, we have to expect further significant interest rate hikes in coming months. But by going harder and faster into restrictive territory, there is a greater risk of a hard landing and a potential recession," Knightley said in a note Friday. "The housing market is particularly vulnerable given prices are up nearly 40% nationally since the start of the pandemic due to stimulus-fuelled demand vastly outstripping the limited supply of properties for sale."

Another event to monitor will be Powell's testimony before the Senate Banking, Housing, and Urban Affairs Committee on Wednesday and the House Financial Services Committee on Thursday.

Tuesday: U.S. existing home sales (May)

Wednesday: Fed Chair Powell testifies

Thursday: Fed Chair Powell testifies, U.S. jobless claims, U.S. manufacturing PMI

Friday: U.S. new home sales
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

A tug-of-war takes gold lower, then higher, and finally lower on Friday

Gold traders experienced extreme price volatility beginning with a $70 drop on Monday and Tuesday, higher prices on Wednesday and Thursday, and a final price decline on Friday. This tug-of-war shifted market sentiment causing market participants to concentrate on either spiraling inflation or higher interest rates. The shift between these two opposing forces resulted in dramatic price increases and declines.

Last week’s CPI report which revealed that the current level of inflation is at 8.6% created bullish undertones moving the market higher during the middle of the week. However, the focus shifted to the Federal Reserve's revision of its forward guidance announcing a rate hike of 75 -basis points (3/4%) on Wednesday taking fed funds rates to 1.5% – 1.75%. This was the largest single rate hike since 2009.

Based on a weekly price decline in gold of approximately $40 the clear winner of this tug-of-war is the interest rate hike enacted by the Federal Reserve on Wednesday.

Wednesday’s rate hike was followed by rate hikes from other central banks. On Thursday with the Bank of England raising rates by 25 basis points, the SNB (Swiss National Bank) raised its interest rates by 50 basis points. This follows last week’s announcement by the ECB (European Central Bank) of a 25 basis point rate hike in July and a potential 50 basis point hike in September.

According to Bloomberg News, “June 2022 will certainly be a month to remember in central banking. Global monetary policy makers have laid out the most powerful tightening campaign since the 1980s, with a number of central banks embracing interest-rate increases of a size unimaginable at the start of the year.”

As of 5:10 PM EDT gold futures basis, the most active August contract is currently fixed at $1841.90 after factoring in today’s decline of eight dollars or 0.43%. Today’s price decline in gold was also the net result of dollar strength. The U.S. dollar gained just over 1% (1,01%) taking the dollar index to 104.46. The dollar also closed higher on the week.

Today’s price decline took gold just below its 200-day moving average which is currently fixed at $1843. Our technical studies indicate that current short-term support for gold occurs at $1830 which is the 61.8% Fibonacci retracement. Major support for gold occurs at $1765.50 which is based upon the 78% Fibonacci retracement. The data set used for this retracement begins at the lows and double bottom that occurred at $1680 up to the yearly high of $2078.

These studies also indicate that the first level of resistance occurs at $1860 which is based upon the highs of Thursday and Friday. Major resistance starts at $1878, the 50-day moving average, and $1889.70 which is based on the 100-day moving average.

Gold prices have fluctuated based on the primary focus of market participants. The tug-of-war between focusing on inflation levels or interest rate hikes will continue to be a primary force affecting gold prices through the remainder of this month.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Federal Reserve raises rates ¾%, addressing inflation at 8.6% the highest YoY spike since December 1981

The Federal Reserve took the most aggressive action since 1994 announcing that they would raise rates by 75 basis points (3/4%) taking the fed funds rate to between 150 – 175 basis points. Traders and analysts had been factoring in a more aggressive rate hike on Monday and Tuesday following the release last week of the May inflation numbers vis-à-vis the CPI. Inflation rose to the highest level since the start of the pandemic which led to a recession that was followed by other disruptive events including extreme supply chain bottlenecks, Russia’s invasion of Ukraine, and Covid-related lockdowns in China.

The Federal Reserve’s statement concluded, “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”

The Federal Reserve statement said that the issues mentioned are the primary reasons that members of the Federal Reserve decided to raise their target interest rates to 1 ½% – 1 ¾%. The Fed also anticipates that interest rates will continue to increase to above 3% by the end of 2022.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt, and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.”

The Federal Reserve has long maintained a dual mandate of maximum employment and an inflation rate of 2%. Chairman Powell alluded to a strong possibility that there would be more 75 basis point rate hikes at the next FOMC meeting in July. During his press conference Chairman Powell said that further rate hikes of either 50 or 100 basis points would “most likely” be the appropriate outcome of the central bank’s next meeting in July.

Today’s statement also addressed the Fed’s current economic outlook which anticipates an economic contraction taking the GDP growth rate to 1.7% this year, unemployment rising to 3.7%. Furthermore, they are forecasting that unemployment will rise to 4.1% through 2024. These numbers indicate that it is obvious to the Federal Reserve that its plan to continue to raise interest rates will lead to a further economic contraction and a higher unemployment rate. The committee also acknowledged that inflation levels will remain elevated with the PCE index trending at approximately 5.2% throughout the remainder of this year and gradually reducing to 2.2% in 2024.

The Federal Reserve’s aggressive rate hike and downward revision of GDP were factored into market pricing over the last two trading days. That being said. I still believe that market participants' reaction to today’s aggressive rate hike and downward revision of their economic outlook was an odd one resulting in U.S. Treasury yields moving lower, dollar weakness, along with rallies in U.S. equities and the precious metals markets.

Gold futures gained $22.80 and as of 5:20 PM EDT, the August contract is currently fixed at $1836.10. Silver futures gained 3.51%. The September contract gained almost $0.74 today and is currently fixed at $21.69. This is the opposite reaction for gold and silver prices than was anticipated after the Fed announced the aggressive 75-basis point rate hike today.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Gold, silver continue sell off amid strong greenback, rising bond yields

Gold and silver prices are solidly lower in midday U.S. trading Tuesday, with both metals notching four-week lows. A strong U.S. dollar index that this week hit a 20-year high and U.S. Treasury yields that this week hit multi-year highs are significantly bearish elements keeping the metals prices under selling pressure. Gold and silver bulls got no help from another hot U.S. inflation reading today. August gold futures were last down $19.60 at $1,812.10. July Comex silver futures were last down $0.400 at $20.855 an ounce.

Today’s U.S. producer price index report for May came in a up 10.8%, year-on-year and up 0.5% from April. Those numbers were close to market expectations and the markets showed no major reaction. But make no mistake: inflation in the U.S. and around the globe is running hot and is problematic. History shows problematic price inflation is longer-term bullish for hard assets, including the metals markets.

Global stock markets were mostly lower overnight. U.S. stock indexes mixed at midday. The U.S. stock indexes are in bear market territory, meaning they are down 20% or more from their highs. Despite today’s stabilization in the U.S. indexes, traders and investors see their risk appetites as far from robust.

The data point of the week is the Federal Reserve’s FOMC meeting that began Tuesday morning and ends Wednesday afternoon with a statement. The Fed is expected to raise U.S. interest rates by at least 0.5%. Some reckon the Fed may raise the key Fed funds rate by 0.75%. Fed Chairman Jerome Powell will hold a press conference after the FOMC meeting concludes Wednesday afternoon.

Markets in chaos: Gold price down $50, Bitcoin price hits lowest level since December 2020, stocks plunge

The key outside markets today see Nymex crude oil prices higher and trading around $122.25 a barrel. The U.S. dollar index is firmer in midday trading and not far below this week’s 20-year high. The yield on the 10-year U.S. Treasury note is fetching around 3.3%. Monday the 10-year note hit the highest level in 14 years, at 3.371%.

Crypto currencies remain under strong selling pressure again, with Bitcoin at a 1.5-year low.

Technically, the August gold futures bears have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at this week’s 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 the overnight high of $1,833.30 and then at $1,850.00. First support is seen at the overnight low of $1,809.20 and then at $1,800.00. Wyckoff's Market Rating: 2.5

July silver futures 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 today’s high of $21.36 and then at $21.75. Next support is seen at $20.42 and then at $20.00. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold suffers amid solid gains in USDX, steep rise in U.S. Treasury yields

Gold and silver prices are solidly lower in midday U.S. trading Monday, pressured by a U.S. dollar index that is solidly higher and trading near a 20-year high, and by sharply rising U.S. Treasury yields that are at multi-year highs. Gold prices did hit a five-week high overnight but those gains could not be held. August gold futures were last down $41.30 at $1,833.80. July Comex silver futures were last down $0.681 at $21.25 an ounce.

Global stock markets were mostly lower overnight. U.S. stock indexes are sharply lower at midday and hit new for-the-move lows. The Russia-Ukraine war and its economic implications, and problematic price inflation are weighing heavily on trader and investor sentiment to start the trading week. Add to that mix Covid lockdowns on the rise in China, the world’s second-largest economy and a major supplier of products around the globe. Don’t be surprised to see gold and silver bulls buy this dip amid the keener anxiety in the marketplace early this week.

The key outside markets today see Nymex crude oil prices firmer and trading around $121.50 a barrel. The U.S. dollar index is solidly higher and near a 20-year high. The yield on the 10-year U.S. Treasury note is fetching around 3.4%–the highest level in 14 years.

Crypto currencies are under strong selling pressure again to start the trading week.

The data point of the week is the Federal Reserve’s FOMC meeting that begins on Tuesday morning and ends Wednesday afternoon with a statement. The Fed is expected to raise U.S. interest rates by at least 0.5%. Fed Chairman Jerome Powell will hold a press conference after the FOMC meeting concludes Wednesday afternoon.

Entire financial system is 'a black hole,' crypto will become the dominant force – Garry Kasparov

Also to be monitored closely will be Tuesday’s U.S. producer price index report for May, which is seen up 0.8% from April and compares to April’s reading of up 0.5% from March.

There wase no major U.S. economic data released Monday.

Technically, the August gold futures bears have the overall near-term technical advantage and regained power today. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the June high of $1,878.60. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,850.00 and then at $1,878.50. First support is seen at today’s low of $1,824.70 and then at $1,815.00. Wyckoff's Market Rating: 3.0

July silver futures bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 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 $22.00 and then at $22.25. Next support is seen at today’s low of $20.91 and then at $20.42. Wyckoff's Market Rating: 2.0.
 

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold is great, but it's not Bitcoin – Edward Snowden talks independent money

Gold is Bitcoin without the Internet option, said Edward Snowden, whistleblower and president of the Freedom of the Press Foundation. He also sees the financialization hype dividing the crypto space, advising people to use cryptocurrencies instead of investing in them.

At the Consensus 2022 conference in Austin, Snowden stressed the need for an independent form of finance, which is how gold came up.

"Gold is great, but gold is not portable. Gold is not transmissible beyond borders at the tap of a button. But Bitcoin and crypto, more broadly, are. That is an astonishing thing. It gives us an indication of the power of how the world can be changed," he said virtually on Saturday. "We have too many currencies that are too unreliable. And that's what crypto beginning to address. We are seeing the transformation of cryptocurrencies moving to cryptographic monetary instruments."

The problem crypto is attempting to solve deals with the existing system being fundamentally unfair, Snowden said. "Look at the economy. There is an increasing concentration of recourses in fewer hands. We see this financialization creeping into the crypto ecosystem."

Snowden criticized the crypto industry for letting the financial aspect drive evolution of the space. "Everyone in crypto is fragmenting into tribes because of the financialization of cryptocurrency, they are more about making money," he said.

Snowden's fear when it comes to privacy is identity and money being used against the population. "I am worried about the world in which identity is used against us; our money is used against us. We need free money – in the independence sense."

Snowden once again reiterated that Bitcoin is not private, and that is a failure as an electronic cash system. In the past, Snowden has cited his concerns with this, saying that Bitcoin has a public ledger, not an anonymous ledger.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Inflation driving momentum in gold. but Fed rate hikes remain headwinds

The gold market remains caught in a tug of war between rising interest rates and inflation; however, momentum could be shifting to the bullish side as prices end the week at the top of their range above $1,850 an ounce.

Gold prices have hovered around $1,850 an ounce for the past three weeks. After some intense selling pressure early Friday, the precious metal saw a dramatic rebound as prices bounced off support just above $1,825 an ounce.

August gold futures are looking to end the week with a 1.5% gain, last traded at $1,876.50.

According to some market analysts, disappointing economic data, including hotter-than-expected inflation, provided new bullish momentum for the precious metal. At the same time, further weakness in equity markets is improving gold's safe-haven allure.

"Gold is doing exactly what it should be," said Bob Haberkorn, senior market analyst at RJO Futures. "Investors are once again looking at gold as an inflation hedge and a safe-haven asset."

General market sentiment turned negative Friday after the U.S. Labor Department said its Consumer Price Index rose 8.6% for the year in May. Consumer prices have hit a 40-year high, driven by rising food and energy prices.

A little later Friday morning, the University of Michigan said its consumer sentiment index dropped to 50.2, its lowest level in 50-years. At the same time, consumers expect inflation to rise by 5.4% in the next 12 months.

Haberkorn said that the selloff in equities and the gold rally indicates that the market is starting to realize that there is nothing the Federal Reserve can do to tame inflation.

Although the U.S. central bank will continue to raise interest rates, they will be nowhere high enough to match inflation.

"In this environment, what you really want is gold," he said.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that rising consumer prices are raising the risk of a policy mistake, not just from the Federal Reserve but from central banks worldwide.

Gold sees record bullish sentiment among European retail investors – Spectrum Markets

Gold still needs to deal with the Fed and rising interest rates

Although momentum currently favors gold bulls, the market still faces some challenging headwinds as the Federal Reserve is expected to raise interest rates by 50 basis points next week.

Hansen said he is neutral on gold next week as the market is trying to figure out how high interest rates will eventually go.

"Right now, investors don't know which way the market will go," he said. "I don't want to get involved with gold until we see a sustained move above $1,875."

Bart Melek, Head of Commodity Strategy at TD Securities, said that gold prices could drop back below $1,850 an ounce next week following the U.S. central bank's monetary policy meeting. He added that in the short-term rising interest rates are still negative for gold.

However, Melek added that the question remains just how committed the Federal Reserve will be to taming inflation and if they will risk pushing the economy into a recession.

Long-term, Melek said that he remains bullish on gold as he expects the Federal Reserve "to flake out on interest rate hikes.

"The Federal Reserve is not prepared to do what it takes to get inflation under control," he said.
 

Watch consumption data next week

While markets are paying close attention to inflation, analysts and economists also say that investors need to keep an eye on consumption numbers with U.S. retail sales in focus next week.

Hansen said that if inflation continues to take its toll on the consumer, weaker consumption will lead to lower economic growth.

Economists note that a strong labor market and elevated savings have helped support consumers so far this year; however, savings have dwindled due to waning purchasing power.

"The squeeze on real incomes from higher prices will weigh particularly hard on goods spending ahead given the excesses in that area of the economy relative to services. And with higher interest rates limiting demand for big-ticket items and housing-related spending, total consumption growth is set to slow in the second half of the year," said economists at CIBC.
 

Next week's data

Tuesday: U.S. PPI

Wednesday: U.S. Retail Sales, Empire State Manufacturing Survey, FOMC monetary policy meeting

Thursday: Swiss National Bank monetary policy meeting, Bank of England monetary policy meeting, Philly Fed Survey, weekly jobless claims, U.S. housing starts Bank of Japan monetary policy meeting

Friday: Federal Reserve Chair Jerome Powell gives welcoming remarks at conference on the International Roles of the US Dollar

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

CPI report confirms what Americans already know; Inflation continues to rise

Today the U.S. Bureau of Labor Statistics released the CPI (Consumer Price Index) for May. The report confirmed what North Americans have known and been entrenched in; the fact that inflation continues to spiral out of control, and is now at the highest point in 41 years. The CPI rose 0.3% in April. This takes last month’s inflationary pressures to the highest year-over-year (YoY) change in 41 years. This means If you were born at or after 1982 you are witnessing and living through the highest monthly uptick in inflation (YoY) ever.

Just The Facts

The CPI increased by 1% month over month (MoM)

Inflationary pressures rose in both the CPI and the core CPI

The core CPI rose 0.6% taking the YoY inflation level to 6%

The CPI spiraled to 8.6% YoY the largest yearly gain since December 1981

The largest increases in the CPI were food, energy, and housing costs

Forecasts varied by economists polled by Bloomberg, Reuters, and The Wall Street Journal. Economists polled by the Wall Street Journal predicted that the CPI would come in at 8.3% increasing by 0.7% MoM. Economists polled by Reuters also predicted that the CPI would rise 0.7% MoM. Economists polled by Bloomberg News said that the CPI would reveal that inflation is tracking at about the same monthly pace and that the probability for a higher level of inflation YoY was high.

Economists from all three poles got it wrong. Economists polled by Bloomberg, Reuters, and The Wall Street Journal all underestimated the MoM rise in inflationary pressures.

The largest contributor to this major uptick in inflationary pressures is the cost of energy which rose 34.6%. However, almost all components recorded record-breaking increases including food costs which rose an average of 10.1%. The cost of housing increased by 5.5%, and commodities as a whole increased by 8.5% all on a year-over-year basis.

What this means for consumers; more hardship ahead

Considering that average hourly earnings fell by 3% in the last year and costs of the goods and services they need have risen dramatically equates to more hardship for low and middle-class Americans. This also means that newly acquired debt (mortgages, new car loans, etc.) will not only be harder to qualify for, and they will be more expensive to service. Existing balances will also be dramatically impacted. Variable-rate credit cards will increase making existing balances more expensive to service.

How the current CPI will affect the forward guidance of the Federal Reserve

The Federal Reserve will hold its June FOMC meeting on Tuesday of next week and conclude on Wednesday. While a minority of economists are anticipating a rate hike of 75 basis points (3/4%) the likelihood that the Fed will get more aggressive on the size of monthly rate hikes is extremely minute. The most likely forward guidance of the Federal Reserve is to continue to raise rates by 50 basis points after the remaining FOMC meetings this year. The question becomes how many 50 basis point rate hikes will the Fed implement, and what will the Fed’s funds rate be by the end of the year?

A roller coaster ride for gold traders

Traders and investors experienced another wild trading session which can be best characterized by its extreme volatility. The chart above is a 10-minute candlestick chart of gold futures. At 8:30 AM EDT gold futures opened at $1850, and by 8:40 AM EDT traded to the low of the day at $1826.50. As of 4:40 PM, EDT gold futures are up to $22.70 or 1.23% and fixed at $1875.60.

As we have been addressing for many months now our belief is been that inflationary pressures have not peaked and in fact will continue to rise as long as the underlying cause continues to be persistent. We have been highly vocal in our opinion that the current forward guidance of the Federal Reserve will not move inflationary pressures lower. At best higher interest rates will contract the economy to such an extent that it will result in a recession. At worst that their actions will be detrimental fueling inflationary pressures higher. The current level of inflation and the current forward guidance of the Federal Reserve will be highly supportive of gold prices moving them higher over the course of the next two years.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Gold, silver down as USDX rallies, U.S. Treasury yields remain elevated

Gold and silver prices are lower in midday U.S. trading Thursday, pressured by a rally in the U.S. dollar index on this day and by U.S. Treasury yields that remain elevated. Gold down-ticked a bit more following the European Central Bank regular monetary policy meeting, at which the central bank kept its policy unchanged but said it will likely raise interest rates starting in July. August gold futures were last down $8.50 at $1,848.10. July Comex silver futures were last down $0.404 at $21.685 an ounce.

Global stock markets were mostly weaker overnight. U.S. stock indexes are weaker at midday. Trading in the stock indexes has been choppy recently, but the bulls still don’t have the power to start near-term price uptrends.

The other major data point of the week is Friday morning’s U.S. consumer price index report for May. The CPI is expected to be up 8.2%, year-on-year, after a rise of 8.3% in April. Many look for this report to run extra hot, which would be a markets-mover Friday morning.

Gold market is waiting for next week's Fed meeting – StoneX's O'Connell

The key outside markets today see Nymex crude oil prices slightly lower and trading around $121.50 a barrel. The U.S. dollar index is weaker in early trading. The yield on the 10-year U.S. Treasury note is fetching 3.2%.

Technically, August gold futures bears have the overall near-term technical advantage but the bulls are still working on a fledgling price uptrend. However, they need to show more power soon to keep it alive. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at this week’s high of $1,862.40 and then at the June high of $1,878.60. First support is seen at this week’s low of $1,838.50 and then at the June low of $1,830.20. Wyckoff's Market Rating: 4.0.

July silver futures bears have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at today’s high of $22.165 and then at this week’s high of $22.565. Next support is seen at today’s low of $21.535 and then at the June low of $21.41. Wyckoff's Market Rating: 3.0.

July N.Y. copper closed down 865 points at 436.86 cents today. Prices closed nearer the session low today. The copper bulls have the slight overall near-term technical advantage. A three-week-old price 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 last week’s high of 457.70 cents. The next downside price objective for the bears is closing prices below solid technical support at 420.00 cents. First resistance is seen at today’s high of 445.15 cents and then at this week’s high of 447.20 cents. First support is seen at 435.00 cents and then at 430.00 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley