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

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

The gold market has been trapped in a three-week holding pattern and could continue to consolidate until next week's Federal Reserve monetary policy meeting, according to one market analyst.

The CME FedWatch Tool shows that markets see a more than 90% chance that the Federal Reserve will raise interest rates by another 50-basis points. The central bank has signaled that it could raise interest rates by 50-basis points at the next two meetings. Meanwhile, markets are pricing in three consecutive aggressive moves.

However, in her latest weekly analysis, Rhona O'Connell, Head of Market Analysis for EMEA and Asia at StoneX, said that gold investors should look past any potential knee-jerk reactions following next week's announcement and focus on the bigger picture.

Gold prices continue to trade around the $1,850 level. August gold futures last traded at $1,856.70 an ounce, up 0.25% on the day.

Even with the Federal Reserve's aggressive monetary policy stance, markets see interest rates hitting a high of 3.50% by the end of the year. However, inflation pressures will remain elevated.

"At present, U.S. two-year yields are 2.7%, while headline inflation is 8.2%, although there are still some dislocations to drop out of the year-on-year calculations. So, while the headlines about rate hikes are likely to generate knee-jerk reactions in the markets, the longer-term view should revolve around persistent negative real rates," said O'Connell.

Although markets continue to price in significant rate hikes during the summer, O'Connell noted that there is still a lot of uncertainty regarding how the central bank's plan to reduce its balance sheet will fit with current monetary policies.

Gold price remains chained to $1,850 as OECD lowers growth forecasts

This month Federal Reserve started to run down its balance by $47.5 billion. By September, it will begin reducing its balance sheet by $95 billion.

"Tightening gives a natural buoyancy to bond yields, and it is certainly possible that this could allow the Fed to be less aggressive in its interest rate hiking than the bond markets have been discounting," said O'Connell. "So, the essential financial parameters remain supportive for gold, but the professional markets are still not committing in any size."

Ahead of the Federal Reserve's decision is Friday's Consumer Price Index report. Economists are expecting the data to show that inflation pressures have peaked. The question remains, though, as to how fast it will take for prices to cool down.

According to consensus forecasts, economists are expecting annual headline inflation to rise 8.2%, down slightly from the March peak at 8.5%. Annual core inflation, which strips out food and energy prices, is expected to increase 5.9%, down from 6.2% in April.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Gold pricing consolidates above the 200-day moving average

As of 4:55 PM EDT gold futures basis, the most active August 2022 contract is fixed at $1854.40 which is a net gain of $10.70 or 0.58%. In fact, over the last 13 trading days, gold prices have remained and closed above a key technical study that indicates whether or not a stock or commodity is in a long-term bullish or bearish trend; the 200-day moving average. Currently, this key indicator is fixed at $1841.70. At the same time, it must be noted that gold has been trading in a narrow and defined trading range between $1821 and $1875 for over two weeks now.

When viewing gold prices through a Japanese candlestick chart traders focus on the "real body" which is a rectangle drawn between the open and closing prices. In a daily Japanese candlestick chart, the real body represents the open and closing prices for the trading day. The daily high and low are referred to as wicks and do not warrant the same attention as the real body.

Japanese candlestick theory believes that the most important component of a daily candlestick is the relationship between its opening and closing price. They view each trading day as a battle and the outcome of that battle is viewed through the real body of a candlestick to determine whether or not the bullish or bearish faction was able to dominate price action.

Therefore, the fact that over the last 12 consecutive trading days the real body on the daily Japanese candlestick has been above the 200-day moving average is significant. It indicates that a base has been forming at current pricing and although there have been four instances in which the lower wick has occurred below $1841.70 is not as important as the fact that the real body of the candlestick has remained above this moving average.

This puts the first level of technical support at $1840. The first level of technical resistance occurs at $1870 which corresponds to the closing price on Thursday, June 2, and the opening price on Friday, June 3. Major resistance occurs between $1889 and $1891 as these two price points represent the 50 and 100-day moving averages.

It is also important to note that gold prices have remained fairly stable defined by the $50 differential between recent daily highs and lows considering the recent dollar strength. Today’s moderate gains in gold were based upon bullish market sentiment as the dollar index was in essence unchanged on the day.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

Gold loses early gains as greenback, U.S. Treasury yields push higher

Gold prices are modestly down in midday U.S. trading Monday, while silver is holding mild gains. Both metals lost altitude in morning trading as the U.S. dollar index rallied to its daily high, while U.S. Treasury yields resumed their upward advance. The yield on the 10-year U.S. Treasury note is now fetching 3.02%. August gold futures were last down $4.70 at $1,845.50. July Comex silver futures were last up $0.212 at $22.115.n ouces

Global stock markets were mostly up overnight. U.S. stock indexes are higher at midday. Trader and investor risk appetite is a bit keener to start the trading week, amid easing Covid restrictions in China.

Two key data points of the week are the European Central Bank’s regular monetary policy meeting Thursday, at which the central bank is expected to lay out plans for tightening its monetary policy. On Friday the U.S. consumer price index report for May is set for release. The CPI is expected to be up 8.2%, year-on-year, after a rise of 8.3% in April.

Emerging market central banks represent new demand for gold as they de-dollarize – Société Générale

The key other outside market today sees Nymex crude oil prices a bit weaker and trading around $118.50 a barrel.

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 fresh 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 today’s high of $1,861.20 and then at $1,875.00. First support is seen at last week’s low of $1,830.20 and then at $1,825.00. Wyckoff's Market Rating: 3.5

July silver futures bears have the overall near-term technical advantage. However, the bulls are working on a fledgling price uptrend on the daily chart. 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 $22.565 and then at $23.00. Next support is seen at $21.785 and then at last week’s low of $21.41. Wyckoff's Market Rating: 3.5.

July N.Y. copper closed down 375 points at 443.40 cents today. Prices closed near mid-range today. Prices have backed well down from last Friday’s five-week high. The copper bulls still have the 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 465.00 cents. The next downside price objective for the bears is closing prices below solid technical support at last week’s low of 425.90 cents. First resistance is seen at 450.00 cents and then at last week’s high of 457.70 cents. First support is seen at today’s low of 443.65 cents and then at 435.00 cents. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Russia's Gold Standard a "Pipe Dream"; Why a Gold Standard Is Not Happening – Jeff Christian and Gary Wagner

According to Jeff Christian and Gary Wagner, Russia did not return to a gold standard after the Ukraine war. And even if they had, a gold standard won't work.

Jeff Christian is the Managing Director of CPM Group, while Gary Wagner is the Editor of TheGoldForecast.com. They spoke with David Lin, Anchor and Producer at Kitco News.

Monetary Policy and Gold

Central banks around the world have been hiking interest rates. The Bank of Canada recently increased its key policy target to 1.5 percent. However, gold's price has remained relatively flat despite such monetary tightening.

Christian is unsurprised that the price has not moved much.

"You still have historically low interest rates," he said. "… And you also have negative interest rates on an inflation-adjusted basis… In addition to that, the increase in interest rates reflects concerns about inflation, which are positive for gold prices."

He remarked that increasing "volatility and uncertainty" are bullish for gold.

Wagner added that the Federal Reserve's asset sales would affect the demand for gold, "They're reducing their balance sheet. Both [higher interest rates and asset sales are] putting a strong effect on the demand side because it's more expensive to do business, more expensive for goods."

Russia's Gold Fix

In March of 2022, the head of Russia's parliament Pavel Zavalny said that countries can pay for Russian resources with gold. Yet the claim that this implies a return to a gold standard is a "Russian pipe dream," according to Christian. "… The reality is that nobody is actually paid in gold, or in fact in rubles, for the most part."

Christian opined that Russia's rhetoric around gold was a "face-saving" measure, and that the Russian energy company Gazprom was simply accepting payment in Euros and converting them to rubles.

 Is global 'slavery' coming? Gold guards against 'total control' – Bob Moriarty

He added that the purported peg of 5,000 RUB to 1 gram of gold is "inaccurate." In the early days of the Ukraine conflict, said Christian, "there was a tremendous demand for gold from investors within Russia, and they were paying a premium to the world price. The 5,000 ruble per gram was a discount to the world price. So the refiners were saying, why would we sell to the central bank at a discount… when we can get a premium by selling to investors? So after about a week or so, the central bank of Russia actually pulled back and said, no, we will buy gold from domestic producers and refiners at a negotiated price relative to the international price… there was no peg."

A Gold Standard Comeback?

Wagner said that a return to a gold standard would be a "hard to an impossible task." He added, "Can we go back to some kind of modified gold standard? Possibly. But an actual gold standard? I don't believe that any country has the ability to back their currency dollar-for-dollar with gold. That would take way too much gold, when you look at the amount of currency in the system."

Christian added, "Let's say I go to a gold standard, and I make my currency convertible," said Christian. "What's happened in the past? Well in the 1960s, the U.S. lost 60-70 million ounces of gold at a fixed price. Prior to that, there were runs on the Bank of England when they had a gold standard."

To find out Christian and Wagner's views on whether a gold standard would tackle inflation, watch the above video.
 

By Kitco News

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

What's next for gold price after May's U.S. employment surprise?

Despite an impressive two-day rally, gold is ending the week flat after the upbeat U.S. May employment report managed to keep the doom and gloom projections about the economy's future at bay.

The gold market hit new daily lows Friday as markets digested U.S. nonfarm payrolls rising 390,000 versus the expected 328,000.

"The May jobs report is showing moderation in economic momentum. However, the sharp declines anticipated by the market recently don't seem to be materializing," TD Securities global head of commodity strategy Bart Melek told Kitco News. "On the margin, this implies that the market may well increase rate expectations. Indeed, rates (nominal and real) across the curve rose following the report. This helped to drive the yellow metal below $1,860/oz at the time of writing, down from around $1,863-66/oz before the report was released."

For gold, the upbeat employment numbers mean that the Federal Reserve can stay aggressive with its planned 50-basis-point rate hikes in June and July, which weighs on the precious metal.

"Markets may have been a little premature to make the assumption that the Fed is not going to be as aggressive. We won't know that for quite some time. So far, economic data is okay," Melek said. "We judge that this report, along with any additional future data showing a steadfast economy, should pull prices back down to the 200dma ($1,842). If data stays firm for a prolonged period, wages remain bid, the yellow metal is likely to fall below $1,800/oz."

Inflation is also very stubborn, forcing the Fed to stay on its hawkish path with QT and interest rates.

"Price pressures are manifesting in services, which are picking up inflation with a lag. As such, input costs from energy to labor costs will manifest. Prices index will remain stubbornly high for a period," warned Melek. "From a central bank perspective, they have to keep that tightening policy ongoing."

The more optimistic data are taking the safe-haven trade away from gold, but the doom and gloom predictions will weigh on risk-on sentiment in the long-term, said OANDA senior market analyst Edward Moya.

"Gold prices edged lower after a robust nonfarm payroll report sent the dollar higher. Traders expected to see a stronger deceleration with job growth, making the Fed pivot away from a half-point rate hike in September (June and July are now widely expected to be 50bps hikes each). The economy is not softening quickly, and that took away the need for safe havens today," Moya said. "Growing doom and gloom calls, however, should keep the precious metal supported over the short-term."

High inflation will support gold prices this summer as investors choose to get rid of "bad money" and buy into "good money," according to Gainesville Coins precious metals expert Everett Millman.

"This week, $1,850-65 flipped from stubborn resistance levels to key support levels for the gold price. The rising global demand for gold reflects a well-established economic principle, Gresham's Law — bad money drives out good money. If you have bad money that is losing its value, you want to spend it as quickly as possible. Gold is good money, hard money, and there is an incentive to keep it," Millman told Kitco News. "Gold is proving to be the preferred store of value given the selloff in stocks and crypto."

However, the Fed's aggressive stance still poses a downside risk to gold, noted Millman. "We can't rule out that QT and rising interest rates will push gold down in the near term," he said. "$1,900 is the next key level for gold to break through. If gold fails at $1,900, it will continue to trade in the mid-$1,800 for the rest of the summer."

Tennessee removes sales tax on gold and silver, only eight states to go

Recession warnings are keeping gold in that mid-$1,800 level, Millman added. "The Jamie Dimon economic 'hurricane' comment, Yellen admitting that she was wrong about inflation. These are not the type of comments that happen when the economy is strong. In any kind of recessionary environment, when people are worried about losing jobs or the value of their wealth, gold is the logical place for money to preserve value."
 

Next week's data

Thursday: ECB rate decision, U.S. jobless claims

Friday: U.S. CPI

By Anna Golubova

Time to buy Gold and Silver on the dips

Tim Moseley