Modest price gains for gold as bulls still have strength

Gold prices are mildly higher and silver mildly lower in midday U.S. trading Wednesday. Chart consolidation is the feature in both metals this week, but the bulls still hold the upper technical hand at present. December gold was last up $5.10 at $1,991.90. December silver was last down $0.111 at $23.005.

Trader and investor attention is no longer keenly fixated on the Israel-Hamas war. That means more normal market factors are in play. Today, the precious metals markets are seeing buying interest limited due to this week’s rally in the U.S. dollar index and an uptick in U.S. Treasury yields at mid-week.

  Gold prices consolidating just below $2,000, caught between opposing forces

The key outside markets today see the U.S. dollar index slightly higher after solid gains Tuesday. Nymex crude oil prices are higher and trading around $85.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note yield is presently fetching 4.914%.

Technically, December gold futures bulls have the overall near-term technical advantage. Prices are in an uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the October high of $2,009.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,920.00. First resistance is seen at $2,000.00 and then at $2,009.20. First support is seen at today’s low of $1,973.60 and then at this week’s low of $1,964.60. Wyckoff's Market Rating: 6.0

December silver futures bulls have the overall near-term technical advantage. Prices are still in an uptrend on the daily bar chart but bulls need to show fresh power soon to keep it alive. Silver bulls' next upside price objective is closing prices above solid technical resistance at $24.05. The next downside price objective for the bears is closing prices below solid support at $21.60. First resistance is seen at this week’s high of $23.505 and then at last week’s high of $23.88. Next support is seen at today’s low of $22.69 and then at $22.50. Wyckoff's Market Rating: 6.0.

December N.Y. copper closed down 245 points at 359.95 cents today. Prices closed near the session low today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, three-month-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 378.60 cents. The next downside price objective for the bears is closing prices below solid technical support at 340.00 cents. First resistance is seen at today’s high of 364.90 cents and then at 367.45 cents. First support is seen at Tuesday’s low of 356.25 cents and then at this week’s low of 351.95 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Gold, silver up, but down from daily highs on some profit taking

Gold and silver prices are modestly higher but nearer the daily lows in midday U.S. trading Wednesday. Some profit-taking pressure from the shorter-term futures traders kicked in after both metals touched 13-month highs in the immediate aftermath of a tamer U.S. inflation report this morning. June gold was last up $4.20 at $2,023.20 and May silver is up $0.114 at $25.30.

The U.S. data point of the week saw Wednesday morning’s consumer price index report for March come in at up 5.0%, year-on-year, compared to market expectations for a rise of 5.1%. The CPI rose 6.0% in the February report. Today’s CPI report continues a downward trajectory on consumer inflation and falls into the camp of the U.S. monetary policy doves, who want to see the Federal Reserve back off on its policy tightening. U.S. Treasury yields initially dropped and the U.S. stock indexes rallied on the news. The U.S. dollar index sold off sharply. However, Treasury yields have up-ticked and the U.S. stock indexes have sold off as midday approaches. The rebound in bond yields after the CPI report helped to spur some profit taking in gold and silver. It appears the initial trader/investor euphoria over the tamer CPI report has quickly worn off. In fact, the core CPI reading actually up-ticked by 0.1%, to 5.6%, year-on-year, in the March report.

  Gold price hits session highs as U.S. CPI sees annual inflation rising 5%, down sharply from 2020 highs

The minutes of the last FOMC meeting are due out this afternoon.

The key outside markets today see the U.S. dollar index sharply lower. Nymex crude oil prices are up, hit a 2.5-month high and trading around $82.50 a barrel. The benchmark 10-year U.S. Treasury note yield is presently fetching 3.421%.

Technically, June gold futures bulls have the solid overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the all-time high of $2,078.80, scored in March of 2022. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the April low of $1,965.90. First resistance is seen at the March high of $2,031.70 and then at the April high of $2,049.20. First support is seen at today’s low of $2,015.70 and then at $2,000.00. Wyckoff's Market Rating: 8.5



May silver futures bulls have the solid overall near-term technical advantage. Prices are in a steep four-week-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $27.50. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at today’s high of $25.825 and then at $26.00. Next support is seen at $25.00 and then at this week’s low of $24.775. Wyckoff's Market Rating: 8.5.

May N.Y. copper closed up 165 points at 403.60 cents today. Prices closed nearer the session high today. The copper bulls have the slight overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the March high of 417.45 cents. The next downside price objective for the bears is closing prices below solid technical support at the March low of 382.20 cents. First resistance is seen at today’s high of 405.45 cents and then at 407.15 cents. First support is seen at this week’s low of 396.30 cents and then at last week’s low of 392.60 cents. Wyckoff's Market Rating: 5.5.

By

Jim Wyckoff

Time to Buy Gold and Silver

Tim Moseley

Gold's bullish uptrend won't be reversed by a 'mean washout' – analysts

The gold market retreated Friday as better-than-expected U.S. data and hawkish comments from St. Louis Fed President James Bullard weighed on prices. But analysts don't see the gold's bullish uptrend reversing soon.

Gold was down around $15 on the day after hitting a high of $2,006.50 earlier in the session. After seeing its best gains in three years last week, gold continues its move higher, testing the $2,000 an ounce level a few times this week. At the time of writing, April Comex gold futures were trading at $1,980.50, down 0.77% on the day.

Gold began to decline Friday after the preliminary U.S. manufacturing and service-sector sentiment data beat expectations for March. The flash U.S. manufacturing Purchasing Managers (PMI) Index advanced to 49.3, marking a five-month high. And the service sector saw the PMI reading jump to 53.8 in March, marking an 11-month high.

Also, St. Louis Fed President James Bullard said Friday that as the banking sector stress eases, the Federal Reserve will have to raise rates higher.

Bullard remained hawkish "in reaction to the stronger economic news and also on the assumption that the financial stress abates in the weeks and months ahead."

He raised his terminal rate estimate to a 5.50%-5.75% range, while his colleagues maintained their target primarily between 5.00% and 5.25%.

But the bond market is signaling that a Fed pivot is coming, RJO Futures senior market strategist Frank Cholly told Kitco News.

"The bond market is telling us we will get a rate cut. That is favorable for gold. We see a correction after a big rally. But that is not enough to change the trend," Cholly said. "It could be as early as June that we see the Fed start to cut."

In the short term, analysts do not rule out a reversal in gold after its quick gains. But the overall trend will remain intact, taking prices above $2,000 an ounce.

"The immediate stretch might be at risk of exhaustion here. But the trade is constructive as long as gold stays above $1,850. Even if we get a mean washout, the downtrend is broken, and I am looking for an uptrend resumption," Forex.com's senior technical strategist Michael Boutros told Kitco News.

The levels to watch on the way up are $2,034, the record-high weekly close, and then $2,075. That would open the door to $2,150, Boutros said, adding that gold spent very little time above $2,000 an ounce in 2020 or 2022.

The banking crisis, combined with the Fed rate hike expectations easing, is creating "true risk-off haven flows," the technical strategist added.

The biggest variable for gold going forward is the contagion risk in the banking sector. And the central question is whether Washington is willing to backstop all depositors. On that front, U.S. Treasury Secretary Janet Yellen and Fed Chair Jerome Powell have been sending mixed signals.

"We are not done with the banking problem. There is a flight of capital from regional banks, and we might see structural failure. How deep it stretches is the problem. There is also the moral hazard of backstopping all depositors. Can't go case-by-case basis," Boutros said. "With regards to gold, it is a constructive move."

Cholly sees gold well supported at $1,950-$1,975 an ounce.

The banking crisis is doing the work for the Fed, and there could be a credit crunch coming, Cholly warned.

"It will get harder for people to borrow money. That is going to slow things down. We will see things slow down without the Fed having to raise rates further. Banks will be tighter and fussier about lending money," he said.

Next week's data

Tuesday: U.S. CB consumer confidence

Wednesday: U.S. pending home sales

Thursday: U.S. jobless claims, GDP Q4

Friday: U.S. PCE price index

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

'Original fear of missing out': Gold price explodes and could test $2k after best week in 3 years – analysts

The gold market surged as prices saw their best week in three years amidst the fallout of the banking sector. Analysts are not ruling out a test of the $2,000 an ounce level next week as markets look past the Federal Reserve monetary policy meeting scheduled for Wednesday.

The precious metal rose from $1,867 an ounce to above $1,980 this week, posting a gain of more than $110 and its best performance since March 2020. April Comex gold futures were last trading at $1,988 an ounce, up $65 on the day.

The biggest event markets were gearing up for all week – the Federal Reserve monetary policy meeting – is now on the periphery. Markets are pricing in a 25-basis-point hike for Wednesday, but investors are more focused on the potential pause and rate cuts that could follow.

After wild swings in rate hike expectations this week, the gold market is in a winning position, according to analysts.

"Markets are concluding that we'll see the Fed go for another 25bps increase and then probably sit on it for a while and see what happens. The view from the gold perspective is that given disruptions in the banking system and the U.S. Treasury Department's willingness to help, we might get accommodation that allows inflation to hang around longer at a higher level. This is a good thing for gold," TD Securities global head of commodity strategy Bart Melek told Kitco News.

The consensus in the gold market is that the Fed will have to ease up before inflation is tamed, Melek added. And that is a massive shift in perspective from just a few weeks ago.

Another 25 bps hike might be interpreted as nothing more than a move by the Fed to keep its credibility, said Gainesville Coins precious metals expert Everett Millman. "They don't want to be seen as abandoning higher rates so quickly," Millman told Kitco News.

After Wednesday's decision, the Fed is unlikely to keep raising rates, Millman added. "Something will surely break if the Fed keeps its foot on the pedal," he said.

What the ECB told us

The European Central Bank raised the rate by 50 basis points this week, holding onto its hawkish stance despite the banking sector worries and market turbulence. RJO Futures senior market strategist Frank Cholly told Kitco News that this gave markets confidence that the Fed would also proceed with its existing plans.

"The market got its answer yesterday when ECB raised by 50 bps. Lagarde hammered the point that inflation has been too high for too long. I don't think 2% inflation is realistic. They know now they will break some things along the way," Cholly said.

Fed's new lending program

The Fed has been helping banks with liquidity issues this week, raising concern that the tightening from last year will be somewhat reversed. According to the latest data from the Fed, banks loaned $164.8 billion from two Federal Reserve backstop facilities this past week.

JPMorgan Chase & Co. estimated that the additional funding from the U.S. central bank's new 'Bank Term Funding Program' could add up to a maximum of $2 trillion in liquidity.

"It puts quantitive tightening on a bit of pause, with more money slashing around," Melek noted.

And the whole idea does not square with the Fed's efforts to tighten monetary policy, nor does it bode well in the fight against inflation, said Millman.

Testing $2,000 an ounce

With the fear of banking contagion risk spreading further, gold is very likely to test $2,000 an ounce next week before seeing some major profit-taking, analysts said.

"I would not be surprised if gold re-tested the highs from last year of above $2,000 an ounce. We can't see the future, but the banking situation gets more concerning by the day. The Fed is stuck between a rock and a hard place of trying to rescue vulnerable banks and fighting inflation," Millman explained. "Those two goals seem to be at cross purposes. Hard to raise rates higher without causing more stress in the banking system."

Melek pointed out that there is no reason why gold couldn't test $2,000 an ounce next week. "A good portion of this move higher is short-covering. But longs might have started getting in as well," Melek described.

The next big test for the gold market will be $1,975 an ounce, said Cholly. And if the precious metal gets a close above $1,950 an ounce, the momentum will continue.

Also, the fear of missing out is pushing prices higher, Cholly added. "This is the original fear of missing out. When gold gets cheap, people tend to stay away from it. But when prices go higher, people buy more," he said.

This is the opposite of what happens with other commodities, which see demand destruction once a certain price level is reached. "I thought gold would reach $2,000 sometime this year. Now, I am convinced it will be over $2,000 and will happen faster than I thought as people begin to chase the market," Cholly noted.

Next week's data

Tuesday: U.S. existing home sales

Wednesday: Fed decision

Thursday: U.S. jobless claims, new home sales

Friday: U.S. durable goods orders

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Are we seeing the first indications of a correction in gold?

This has been a most interesting year for investors and traders who have been active in gold. There have been two completed trends that contained both a multi-month rally and a multi-month correction. During the first week of January gold was already in rally mode, and opened at $1827 on the first day of trading, January 3. By March 8, gold had traded to its highest value this year at $2078 per ounce. The result was a rally in which gold gained approximately $251.

What followed was an extended multi-month correction from March 8th until the last week of September when gold traded to a low of approximately $1620. Gold would test this level on three occasions from September up until the first week of November. During this correction, gold would trade through a series of multiple lower highs and lower lows giving technical confirmation that gold was fully immersed in a bearish scenario.

Another indication was the positioning of three moving averages which moved into full bearish alignment (chart 2 above) which continues to this day. Full bearish alignment using three moving averages results in the longest average (200-day) having the highest value, followed by the 100-day moving average below it, and the 50-day moving average below that. Currently, the 200-day moving average is $1808.60. The 100-day moving average is $1727.50, and the 50-day moving average is $1681.

Chart 3 is a four-hour Japanese candlestick chart of gold futures highlighting the last three highs. After gold hit its highest value this year in March gold prices declined and could be characterized by four consecutive lower highs. However, as you can see on the chart above the first two lower highs occurred in the middle of August when gold hit a high of $1825. That was followed by a lower high at $1738 during the first part of October.

Gold hit approximately $1620 for the third time at the beginning of November which marked the end of the multi-month correction and the beginning of a rally. Yesterday gold hit a high of $1782 and in the last 24 hours has moved to lower pricing. As of 5:16 PM, EST gold futures are currently fixed at $1762.80 after factoring in today’s decline of $13 or 0.73%. This indicates the possibility that yesterday’s high marks the end of this leg of the current rally and could be followed by a correction taking gold to lower pricing. If the current correction results in a higher low than the last low we would get confirmation that the multi-month correction has indeed concluded.

The decline that occurred in gold over the last 24 hours is based upon recent comments by members of the US Federal Reserve in which they signaled that they would not abandon their current hawkish monetary policy to continue to reduce inflation to an acceptable level. The core PCE is still at approximately 6% which is three times the Federal Reserve’s target level of 2%.

While the amount of each rate hike could be reduced, their endgame is still to take inflation close to their target level. Therefore, while we could see interest rate hikes of 50-basis points rather than 75-basis points the Fed today signaled they would continue to raise rates until their objective of lowering inflation is met.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley