Gold price erosion continues amid strong U.S. dollar, higher bond yields

Gold and silver prices are again lower in early U.S. trading Friday, with gold hitting a three-week low. The seemingly relentless appreciation of the U.S. dollar on the foreign exchange market and the resulting rise in U.S. Treasury yields continue to undermine the precious metals markets. December gold was last down $11.50 at $1,625.20 and December silver was down $0.434 at $18.255.

Global stock markets were mixed to lower overnight. U.S. stock indexes are pointed to lower openings when the New York day session begins. The marketplace late this week is more risk averse and focused on the march higher in U.S. Treasury yields. The U.S. 10-year note yield is presently fetching 4.278%, which is the highest level since 2008. The Federal Reserve is hellbent on taming problematic inflation and is willing to let the U.S. economy stall out to get the job done more quickly. This scenario is bearish for stocks, bonds and commodity markets, but bullish for the U.S. dollar.

Goldman Sachs sees a scenario where gold rally's sharply to $2,250 by 2025

The key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are near steady and trading around $84.50 a barrel.

There is no major U.S. economic data due for release Friday.

Technically, the December gold futures bears have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at $1,650.00 and then at Wednesday’s high of $1,659.80. First support is seen at $1,615.00 and then at $1,600.00. Wyckoff's Market Rating: 1.0

September silver futures bears have the solid overall near-term technical advantage and have momentum. Silver bulls' next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at the September low of $17.40. First resistance is seen at today’s high of $18.625 and then at $19.00. Next support is seen at $18.00 and then at $17.40. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold investors still need to be patient

After falling to a new two-year low, the gold market was thrown another lifeline after the Wall Street Journal reported that the Federal Reserve could start to slow the pace of interest rates after its November monetary policy meeting.

Gold prices have managed to end the week back above $1,650, which has been an important short-term psychological level for many investors and technical analysts.

Unfortunately, gold investors have been burned by false hope before. Every time markets start whispering about a potential pivot, gold investors jump into the market and spark a short-term buying frenzy.

So far this year, Rallies have proven to be short-lived because the reality is that with persistently high inflation, the Federal Reserve and other global central banks aren't finished tightening monetary policies.

Although the Fed may slow down its rate hikes into 2023, expectations of a terminal rate above 5% remain in place. According to many market analysts, until that changes, the U.S. dollar will continue to see significant bullish momentum.

And it's not just the U.S. dollar. The Federal Reserve's tightening cycle has pushed the yield on 10-year notes to its highest level since 2008 and is above 4%. Real yields, measured by Treasury Inflation-Protected Securities (TIPS), are trading at 1.7%, a 13-year high. No matter how you look at it, this is a challenging environment for gold and precious metals.

For now, it appears that patients remains the keyword for gold investors. This was a central theme during the London Bullion Market Association's Global Precious Metals Conference. While gold remains an attractive asset in the long term, many analysts have said that now is not the time to buy as the U.S. dollar and rising interest rates will keep prices contained.

Although the market is challenging, many analysts have said that solid physical demand highlights the explosive potential in gold and silver once the Fed Funds rate tops.

Of course, what could make this new rally in gold a little different and sustainable is that consumers are starting to feel the effects of rising interest rates and tighter market conditions are roiling financial markets.

LBMA delegates see silver prices rallying 54% in the next 12 months

Massive uncertainty in the British bond market, followed by the collapse of the Truss government after only 44 days in power, shows how much turmoil there is in the global economy. At the same time, the Bank of Japan is now consistently intervening in currency markets to protect its economy from the unprecedented strength of the U.S. dollar.

Even some major economists are warning about the growing threat of a severe recession looming on the horizon. Dr. Doom himself, Nouriel Roubini, CEO of Roubini Macro Associate and professor at the NYU Stern School of Business, wrote in a recent commentary that the U.S. could fall into a recession by the end of the year. He warned investors that in the decade ahead, the world may face a "Stagflationary Debt Crisis the likes of which we've never seen before."

Roubini also said that in this environment, consumers need to invest in assets that will protect them against inflation, geopolitical risk and environmental damage.

"These include short-term government bonds and inflation-indexed bonds, gold and other precious metals, and real estate that is resilient to environmental damage," Roubini said.

Although the latest rally in gold may be short-lived, the sentiment is that investors should be focused on the long-term potential.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold is an 'unexpected loser,' but silver price is the one stuck with the downgrade from S&P Global

Fundamentals no longer matter as much for the precious metals outlook, with rate hike expectations and concerns around energy having a bigger impact on all metals prices, said S&P Global.

"Metals prices face macroeconomic headwinds. September was characterized by more significant interest rate hikes to combat inflation in major economies as central banks became increasingly concerned by the possibility of a global economic recession in 2023," said Aude Marjolin, associate commodity analyst at S&P Global Commodity Insight.

Next year's gloomy macroeconomic picture is the one weighing on metals, not the fundamentals. And persistently higher inflation is not giving the Federal Reserve any room in the short term to change or pause its tightening course.

"On the cards is the possibility of further interest rate hikes in November, should the Fed strive to meet its 2% inflation target rate," Marjolin wrote in the latest price forecast from S&P Global. "The European Central Bank and the central banks of Norway, Sweden and Switzerland also raised rates in September, as inflation in the eurozone reached 10% — the highest since the inception of the euro."

In the gold outlook, S&P Global introduced a slight update to its consensus price forecasts, with an average upgrade of 0.4% annually through 2026. Marjolin mentioned gold's role in an investment portfolio during economic uncertainty and rising geopolitical risks.

S&P Global sees gold averaging this year at $1,842 an ounce, next year at $1,800, 2024 at $1,769, 2025 at $1,757, and 2026 at $1,753. "Gold has been the unexpected loser of the current macroeconomic environment, with its safe-haven status in direct competition with the U.S. dollar," Marjolin noted.

In its silver outlook, S&P Global has downgraded its prices for the next two years but upgraded its longer-term projection. The latest consensus forecast is now down by an average of 2.3% annually through 2026. "Despite the expected near-term weakness, the silver price is expected to remain broadly stable through to 2026, averaging $22.34/oz," Marjolin said.

S&P Global looks for silver to average this year at $22.50, next year at $22.20, 2024 at $22.31, 2025 at $22.21, and 2026 at $22.47. "With most industrial activity pressured by the weakening economy, demand for silver will likely remain subdued, and so will the price," Marjolin added.

Price forecasts for palladium and platinum were downgraded by about 3% annually through 2026, with S&P Global citing the current macroeconomic environment as weighing on price expectations for palladium and platinum. The outlook sees platinum averaging $1,282 an ounce and palladium at $1,436 in 2026.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold struggles in light of weak dollar as rate hikes loom

Gold continues to struggle even in light of a strong decline in the U.S. dollar. Gold had respectable gains in New York trading today, but gave up those gains in Globex trading. By the close of trading in New York today gold had added $15.10 of value and was fixed at $1664. As of 4:30 PM, EDT gold futures basis most active December contract is up only $5.80 or 0.35% and fixed at $1654.70. The December contract traded to a high of $1674.30 and a low of $1649.10 after opening just $0.80 above today’s low.

Dollar weakness was a major contributor in supporting gold prices from moving lower. Currently, the dollar is down 1.182 points or -1.04% and fixed at 112.025. As seen through the KGX (Kitco Gold Index) market participants were predominantly sellers with spot gold currently fixed at $1649. That is a net gain of $4.60 today. However, on closer inspection market participants were aggressive sellers taking physical gold lower by $12.80. If not for dollar weakness which added $17.40 gold’s gains would have been nonexistent.

Market participants witnessed a strong risk-on sentiment in U.S. equities. The Dow gained 1.86%, the S&P 500 gained 2.65%, and the NASDAQ composite gained 3.43%.

Market participants trading the precious metals are still genuinely concerned about the remaining two FOMC meetings in November and December. It is widely anticipated that there is a high probability that both Federal Reserve meetings will contain interest rate hikes of 75 basis points each.

According to the CME’s FedWatch tool, there is a 97.4% probability that the Federal Reserve will raise rates by ¾% at the November FOMC meeting and a 65.3% probability of a ¾% rate hike in December. This would take the fed funds rate from between 300 and 325 basis points currently to between 450 to 475 basis points by the end of 2022.

Last week market participants were active buyers of both 30-year bonds and 10-year Treasury Notes resulting in an inverted yield curve with yields in the 10-year Notes priced slightly above the 30-year bond. Today that inversion has been neutralized with both the 10-year note and the 30-year bond yielding 4.015%.

Inflation continues to run at a record level with the latest CPI core data revealing a slight uptick in inflationary pressures from 6.3% in August to 6.5% in September. However, the Eurozone is experiencing much higher levels of inflation than the United States with the CPI index registering at approximately 10%. As long as inflation remains extremely hot and persistent it is unlikely that the Federal Reserve will reduce the magnitude and frequency of rate hikes. It remains highly likely that the extremely aggressive monetary policy of the Federal Reserve will result in a recession in the first quarter of 2023. The question remains how deep of a recession will result from the Fed's aggressive rate hikes.

By Gary Wagner

Contributing to kitco.com.

Time to buy Gold and Silver on the dips

Tim Moseley

Gold prices drop sharply as U.S. CPI rises 0.4% in September

Gold prices have dropped sharply into negative territory as U.S. consumer prices rose more than expected in September, raising prospects that the Federal Reserve will maintain its aggressive monetary policy stance through the rest of the year.

Thursday, the U.S. Labor Department said its much-anticipated Consumer Price Index rose 0.4% last month after a 0.1% rise in August. Economists were looking for an increase of 0.2%.

The report said that annual inflation rose 8.2% last month. Economists were expecting to see a rise of 8.1%.

Core CPI, which strips out volatile food and energy prices, rose sharply by 0.6% last month. According to consensus estimates, economists were looking for a 0.4% rise.

For the year, core inflation rose 6.6%.

The gold market has been unable to withstand solid momentum in the U.S. dollar and rising bond yields. December gold futures last traded at $1,666 an ounce, down 0.69% on the day.

The report noted that the inflation threat is growing and flowing through to the general economy as food, shelter and medical costs outpace falling energy prices. The report said gasoline prices fell 4.9% last month, with the overall energy index dropping 2.1%.

The hotter-than-expected inflation data came one day after the minutes from the Federal Reserve’s September monetary policy meeting showed that the central bank is committed to cooling down consumer prices even as the economy weakens.

In reaction to the CPI numbers, markets have fully priced in a 75-basis point move next month and see a small possibility of a full 1% move. Expectations for a 75-basis point hike also jumped sharply for December.

Analysts have said that rising interest rates, supporting the U.S. dollar at a 20-year high will continue to be strong headwinds for gold prices.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold/Silver – Where is the bottom?

It was another volatile week in the markets, both for the longs and the shorts, with the technical backdrop continuing to deteriorate. Rampant inflation reaffirms the Federal Reserve will continue to reverse the loose monetary policy after CPI on an annualized basis came in at 8.2% versus expectations of 8.1%. The latest CME Fedwatch tool is pricing in a 97.8% chance of a 75 bps rate hike at the November 2 meeting and now a 2.2% of 100 bps. Meanwhile (as I am writing this), the U.K. Finance Minister was fired as they now attempt to reverse the proposed dovish economic plans previously outlined. It seems unwinding over a decade of quantitative easing and interest rates near zero will be very difficult, resulting in stocks, bonds, and housing crashing even from these levels.

When will the Federal Reserve pivot? Unemployment is hovering near multi-decade lows, and economic data continues to beat expectations, keeping the Fed's foot on the rate hike cycle until spring 2023. The first sign of a rate "cut" is not priced in until fall 2023, meaning this bear market is not even close to over. The Fed is attempting to remove all the excess leverage and irresponsible risk-taking in the market while crushing inflation at the same time. I say, "Good luck with that," and "operation break stuff" is underway.

Daily Gold Chart

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By Phillip Streible

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Gold price drops nearly $90 from October highs, Wall Street turns exceedingly bearish on precious metals

The short-term outlook on gold remains bleak, with analysts turning overwhelmingly bearish on the precious metal as the $1,650 an ounce level breaks.

The precious metal is down nearly $90 from its October highs of $1,737 an ounce, with December Comex gold futures last trading at $1,648.70, down 1.69% on the day.

The technical picture is also quite bearish as the selloff opens the door to $1,600 an ounce. "Near-term technicals remain bearish," Kitco's senior analyst Jim Wyckoff said Friday. "Gold and silver bulls remain perplexed by their metals' inability to catch a safe-haven bid amid heightened geopolitical and marketplace uncertainties."

The main culprit making things challenging for gold is the hotter-than-expected inflation forcing the market to re-price the aggressive Federal Reserve rate hike expectations. And that is giving the U.S. dollar an additional boost.

"Gold is still struggling. In the cash market, it has fallen seven of the past eight sessions. The momentum indicators are trending lower," said Bannockburn Global Forex managing director Marc Chandler. "A break of $1,642 may signal a retest on $1,615. The most bullish development would be a move above $1,685. A close above $1,672 could help stabilize the tone."

Survey results

Kitco's weekly gold survey results revealed that Wall Street is now exceedingly bearish on gold prices next week. Out of nine analysts participating in the survey, 78% said they expected lower prices next week, and only 22% were bullish. There were no votes expecting sideways action next week.

The Main Street side remained bullish for next week, but the bearish segment was growing. Out of 858 retail participants, 45% expected higher prices, 35% called for a move lower, and 20% remained neutral, Kitco's survey showed.Kitco Gol

Re-pricing of Fed's rate hike expectations

Keeping the U.S. dollar near 20-year highs are the expectations of a 99.7% chance of another 75-basis-point hike in November, a 74% chance of an additional 50-basis-point hike in December, and possibly a series of smaller rate hikes in February and in March, according to the CME FedWatch Tool.

Gold is a 2023 story, but these are the currencies to buy it in right now

As long this macro-environment exists, there will be more downside in gold.

"December gold has not finished off the short-term downtrend on its daily chart, with the target still down near $1,645. This past week got close as the contract hit a low of $1,648.30," said Darin Newsom Analysis president Darin Newsom. "The flip-side of the coin is the U.S. dollar index continues to indicate its intermediate-term trend has turned down, from a technical point of view."

And even those few analysts who remain bullish on the precious metal in the short-term are not ruling out a drop lower before the rally kicks in. "I am a bull on gold and silver, but I feel we will see the March 2020 lows (at least in the shares) taken out first," said VR Metals/Resource Letter publisher Mark Leibovit.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold, silver recover most of sharp, early losses

Gold and silver prices are modestly lower in midday U.S. trading Thursday but have made a solid rebound from early-morning losses following another hot U.S. inflation report. Strong losses in the U.S. dollar index and higher crude oil prices today are working in favor of the precious metals market bulls. However, rising U.S. Treasury yields are still keeping buyers in gold and silver timid. December gold was last down $4.30 at $1,673.30 and December silver was down $0.093 at $18.845.

Today’s highly anticipated U.S. consumer price index report for September showed a rise of 0.4% from August, which was just above the expected rise of 0.3%. Year-on-year, the CPI was up 8.2%. The report was expected to come in at up 8.1%, year-on-year, following a rise of 8.3% in August. On Wednesday the U.S. got a hot producer price index reading for September, at up 8.5%, year-on-year. U.S. Federal Reserve officials have recently reiterated their aggressively hawkish stance on monetary policy, which has kept the general marketplace uneasy, for fear of pending U.S. and/or global recession. Today’s CPI report suggests the Fed is correct regarding its belief that inflation is still not under control.

Global stock markets were mixed to weaker overnight. U.S. stock indexes are solidly higher at midday after dropping sharply after the CPI report.

Now is the time to find value in the junior mining sector – Radisson Mining director Michael Gentile

Before the CPI data, risk appetite in the general marketplace had up-ticked on reports the U.K. government is going to roll back its controversial tax and spending plans that had roiled the financial markets the past two weeks. The British pound rallied and U.K. bond yields fell on the news.

The key outside markets today see the U.S. dollar index sharply lower. Nymex crude oil prices are higher and trading around $89.25 a barrel. The U.S. Treasury 10-year note yield is presently fetching around 3.9%.

Technically, the gold futures bears have the solid overall near-term technical advantage. 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 today’s high of $1,688.90 and then at $1,700.00. First support is seen at today’s low of $1,648.30 and then at $1,635.00. Wyckoff's Market Rating: 2.0

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 $20.00. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at today’s high of $19.29 and then at Tuesday’s high of $19.725. Next support is seen at today’s low of $18.41 and then at $18.00. Wyckoff's Market Rating: 2.5.

December N.Y. copper closed up 205 points at 344.50 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 this week’s high of 347.70 cents and then at 350.00 cents. First support is seen at today’s low of 335.40 cents and then at 330.00 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 prices remain down as Fed stays committed to reducing inflation even as economy slows – FOMC minutes

The gold market remains under pressure but is not seeing any new price action as the Federal Reserve remains committed to tightening its monetary policy to cool down the growing inflation threat.

Although the U.S. central bank sees growing downside risks to the economy, the minutes of the September monetary policy meeting show that the committee remains focus on brining inflation down by raising interest rates.

“Participants reaffirmed their strong commitment to returning inflation to the Committee’s 2 percent objective, with many stressing the importance of staying on this course even as the labor market slowed,” the minutes said.

According to some market analysts, the latest minutes did not reveal much new information on U.S. monetary policy.

“I don't see much here that's a surprise. The Fed and market are aligned with hiking to around 4.75% and then pausing. Markets are largely unmoved on the headlines,” said Adam Button, chief currency strategist at Forexlive.com.

The gold market has largely ignored the hawkish sentiment in the minutes. December gold futures last traded at $1,683 an ounce, down 0.18% on the day.

The minutes also reiterated the Federal Reserve’s outlook that even if the pace of rate hikes slow, the central bank will maintain the restrictive level for some time.

“Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action. Several participants underlined the need to maintain a restrictive stance for as long as necessary, with a couple of these participants stressing that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation,” the minutes said.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley