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Suspense Builds in Crypto Community as SECs Gensler Delves into AI

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Suspense Builds in Crypto Community as SEC's Gensler Delves into AI 
 

The crypto-verse is truly holding its breath as Gary Gensler of the SEC shifts his gaze towards the challenges presented by artificial intelligence. In the whirlwind domain of cryptocurrencies, where values swing wildly in the blink of an eye, it's rare for a single person's actions to stir up so much speculation and excitement across the entire industry. 

Yet, that's exactly what's happening with Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), as he zeroes in on the hurdles posed by AI. It's like a sudden plot twist in a gripping movie, keeping everyone on the edge of their seats. But the stakes are much higher this time, and the outcome could determine the destiny of an entire economic sector.

Gensler's tenure as the SEC Chair has been all about taking the reins in cryptocurrency regulation. He's brought lawsuits and investigations against significant players in the crypto field, aiming to establish more explicit guidelines and clamp down on possible fraud or deceptive practices. This bold approach marks a clear departure from the more hands-off attitudes of the past. However, just when everyone thought they had the storyline figured out, the narrative took an unforeseen twist.

Gensler, recognized for his deep understanding of financial regulation and emerging technologies, has made a surprising choice to shift the SEC's focus toward the challenges posed by artificial intelligence. This unexpected move has raised eyebrows among those in the industry and those observing from the sidelines. With the crypto market booming and regulations still a work in progress, the question arises: Why would Gensler shift his attention to a whole new frontier?

The crypto sector now stands at a crossroads, uncertain about the path ahead. With Gensler's attention toward AI, those invested in cryptocurrencies can't help but wonder how this chapter will unfold. Will it be a story of collaboration and forward movement or a tale filled with suspense and hurdles? Only time holds the key to revealing the upcoming exciting chapter in this ongoing saga.

Regulatory Concerns and the SEC

The SEC wears the hat of a regulatory guardian, ensuring that securities are handled fairly, and markets run smoothly. When it comes to the realm of cryptocurrencies, their mission extends to safeguarding investors against fraud and unethical practices. They meticulously monitor Initial Coin Offerings (ICOs) to guarantee compliance with securities laws. Think of them as the lawmen of the digital Wild West, where crypto-cowboys roam.

But the plot has taken an interesting twist. The SEC's head honcho, Gary Gensler, has unveiled a change of focus. Instead of exclusively zeroing in on cryptocurrencies, he's turning his attention to the hurdles posed by artificial intelligence (AI) in the financial arena. The US watchful regulators are now keeping tabs on the potential influence of our future robot overlords.

This shift has thrown the crypto industry into a state of suspense. What does this mean for the fate of cryptocurrencies? Will they finally break free from the chains of regulatory uncertainty, or could they find themselves overshadowed as AI takes center stage? The answer is yet to be unveiled. 

But one thing is sure: Gary's shift might divert attention and resources from overseeing cryptocurrencies. This could bring a sigh of relief to those yearning for less interference or raise eyebrows among those advocating for stricter control. The industry is undoubtedly in for some turbulence as this transformation unfolds. It's akin to riding a rollercoaster with no map of its twists and turns. 

The crypto industry has weathered many ups and downs before and is well-equipped to navigate this latest twist. It's all part of the wild and unpredictable nature that makes this industry so intriguing. Moreover, who knows the ways in which AI could revolutionize the cryptocurrency landscape? Picture self-trading coins or wallets that seem to possess a mind of their own. The potential seems boundless!

So, as we await the SEC's strategies to tackle AI challenges, let's keep our gaze fixed on the ultimate goal. Cryptocurrencies have come a long way, and their journey is far from over. As the industry matures and adapts, we'll continue to rise above whatever hurdles come our way. After all, these very challenges shape us and fuel the evolution of this exciting sector.


SEC Chair Gensler speaking before the National Press Club on July 17. Source: SEC

In his speech at the National Press Club, Gary Gensler underlined a significant truth: While the cryptocurrency arena has its fair share of issues like scams, hacks, and money laundering, the realm of artificial intelligence (AI) poses even more significant financial hazards for folks in the US and other nations. As he delved into the topic, Gary spotlighted various risks tied to the ongoing AI surge, which could shake up trillions of dollars worth of assets traded on markets overseen by the SEC.

Looking closely, Gary explains that amidst this AI boom, there's a flip side to the coin. On one hand, AI-generated investment suggestions could revolutionize the customer experience within financial institutions. Sounds promising, right? 

However, he doesn't shy away from pointing out a potential drawback. This emerging technology could also be used to blur the lines of accountability when things go wrong. If errors or failures occur, AI could be exploited to shroud responsibility.  AI-driven trading bots can potentially manipulate financial markets, particularly in unregulated sectors like cryptocurrency. This manipulation can deceive investors into buying assets at inflated prices, resulting in financial losses.

Phishing scams used to stand out due to their misspellings or grammar mistakes, but with the advent of generative AI, creating well-written emails in any language has become effortless. This technology can craft convincing messages that mimic native speakers. In simpler terms, Gary is raising a flag on the potential upsides and downsides of AI's influence on the financial world. It's like navigating a brand-new terrain where incredible opportunities and unforeseen pitfalls are equally likely. As he steers this conversation, Gary is essentially shining a light on the unknown pathways that lie ahead in the realm of AI.

Phishing scams used to stand out due to their misspellings or grammar mistakes, but with the advent of generative AI, creating well-written emails in any language has become effortless. This technology can craft convincing messages that mimic native speakers. In simpler terms, Gary is raising a flag on the potential upsides and downsides of AI's influence on the financial world. It's like navigating a brand-new terrain where incredible opportunities and unforeseen pitfalls are equally likely. As he steers this conversation, Gary is essentially shining a light on the unknown pathways that lie ahead in the realm of AI.


Image source: X [Twitter]

The Waiting Game

Gary Gensler has been quite vocal about his criticisms of the crypto world, accusing it of being filled with hackers, fraudsters, and scams. He's been attacking the industry with full force, making us all wonder what his next move would be. But then, out of nowhere, BlackRock, the giant investment firm, steps in and expresses its interest in crypto. 

They see the value and potential in Bitcoin and other cryptocurrencies. And just like that, Gary's tone changes. He suddenly shifts his focus to AI and suggests we can address the crypto world later. It's almost like that schoolyard bully who picks on a kid, only to back off when he realizes the kid has a strong older sibling to protect them. BlackRock is that older sibling defending crypto against Gary's attacks.

This turn of events is quite amusing to watch. With Gary's attention focused on AI startups, it's safe to say that those in the AI industry need to brace themselves. It seems like Gary is excited about this new direction and wants to regulate AI. As for crypto, there's a sense of relief that his aggressive attacks might lessen. 

However, remember the importance of clarity and resolution for ongoing cases. The SEC seems to be strategizing by prioritizing the current cases before moving on to new ones. After all, a win in these high-profile cases could set a legal precedent that affects the entire industry.

It is essential for the crypto community to come together and support each other in these cases. The industry can't afford to have a fragmented stance where some projects are supported while others aren't. The outcome of the SEC’s regulation against AI will impact the entire crypto industry, and it's crucial for crypto to have a strong track record. 

All the players need to understand that it's not just about supporting one project over another but rather about advocating for a fair and just resolution for all cases involving crypto. So, amid all this, we continue to watch the developments unfold. The shift from attacking crypto to focusing on AI is quite the twist, and it'll be interesting to see how it all plays out. 

The Bottom Line 

AI is making leaps and bounds in technology, with blessings and concerns in store for the cryptocurrency industry. The fusion of AI and various aspects of cryptocurrencies can make things smoother, more accurate, and super secure. Picture this: Trading strategies are automated, and fraudulent activities are identified in a snap. That's the kind of potential AI brings to the table.

But of course, there's the flip side. Cryptocurrencies' unique, decentralized, and roller-coaster nature poses a challenge for AI algorithms. Making sure these systems can keep up with the ever-shifting crypto landscape is no cakewalk. And let's not forget about the worries around privacy, data security, and biases sneaking into AI decisions. All these are real concerns that are keeping industry regulators awake at night.

Now, while the SEC's AI focus might momentarily shift away from cryptocurrency regulation, folks in the know are pretty sure it's just a temporary shift. The waiting game has begun, and everyone's busy speculating. Will we see more regulations? Will the cryptocurrency ecosystem become even more robust and secure? It's like making guesses about what's in the next plot twist.

As for how the industry is reacting to Gensler's AI interest, it's a mixed bag. Some see it as a thumbs-up, a sign that the SEC is on track with keeping up with the times and potential risks. Others have their brows furrowed, worried that too much regulation might stifle the creative spark of innovation. But no matter which side you're on, one thing's for sure: AI and cryptocurrencies are about to collide in ways that could blow our minds.

In a world that's moving faster than ever, the way to win is adaptability. As we all eagerly await the SEC's next moves, folks in the industry should gear up to be informed, ready to act, and quick on their feet. Embracing innovation while addressing valid concerns is going to be the way forward. This fusion of AI challenges and regulations promises a truly exciting future where finance and technology intertwine to change how we perceive and handle money. Get ready because it's bound to be a thrilling ride!

 

 

About: Prince Ibenne. (Nigeria) Prince is passionate about helping people understand the crypto-verse through his easily digestible articles. He is an enthusiastic supporter of blockchain technology and cryptocurrency. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.
 
 
 

 

 

 

 

 

 

Tim Moseley

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Gold futures remain in uptrend with an expected Fed pause

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Gold futures remain in uptrend with an expected Fed pause

The gold market did not see much of a reaction after CPI inflation cooled slightly more than expected on Thursday, followed by a mildly hotter-than-expected PPI inflation report this morning. U.S. CPI annual inflation rose 3.2%, up from 3% in June, while PPI inflation for July came in at up 0.3% from June.

Thursday’s July CPI report was slightly tamer than expected, which solidified notions the Federal Reserve will stand pat on raising interest rates at its September FOMC meeting. Traders of futures tied to the Fed's policy rate now see less than a 10% chance that the U.S. central bank will increase its benchmark overnight interest rate from its current 5.25%-5.50% range at a Sept. 19-20 policy meeting.

They had seen about a 14% chance of a rate hike next month before the tamer than expected July CPI report this week. Traders are now pricing in about a 28% chance of a rate hike by November, down from more than 30% before the release of the CPI report, with higher rates by December seen as even less likely. The Fed's first rate cut is priced into the futures contracts by March of 2024.

Just ahead of the last trading session of July, Gold Futures changed to the front month contract, which is why prices finished the month last Monday above $2000 on a monthly closing basis for the first time in history. December gold is attempting to put in a higher low at $1950 as I type this column, while the spot gold is closer to $1900. Whenever futures significantly outpace spot, prices typically converge higher.

Right on the heels of seeing a Fitch downgrade of the creditworthiness of the U. S. last week, Moody’s has downgraded ten small to medium banks across the country, citing “financial strain” and “strains that could erode their profitability.” Six more banks are under review, and another eleven have been shifted from “stable” to negative.

The U.S. banking system is failing, which has been keeping the gold price well bid above $1900 despite recent U.S. dollar strength. Moody’s noted that rising interest rates would “exacerbate” the ongoing banking crisis, and they foresee the Federal Reserve continuing with hikes for longer than anticipated since inflation was never transitory.

The Fed maintained artificially low rates for far too long, and their attempts to ease inflation by hiking rates are failing. Inflation has soared from sub 1% to peak at over 8%, but has since fallen to around 3% which is still above the Fed's desired 2% target rate.

Meanwhile, U.S. bankruptcy filings for companies with over $50 million in liabilities are exploding higher, and we have not even entered a recession. This number could shoot to all-time highs as zombie companies surviving on low-interest rates for the past decade finally shutter.

The housing and commercial real estate (CRE) markets are also wobbling and coming closer to tipping over with each Fed rate hike. Moody’s predicts a “mild recession” and particularly downgraded banks this week due to CRE troubles that may come home to roost at the banks

Specifically, CRE portfolios that could lead to more banks collapsing into a rising river of real-estate defaults that may soon sweep over the entire banking sector. Several banks have already collapsed, with more that are shaky. Although we have not had a replay of the 2008 bank crisis, it could still happen.

Furthermore, U.S. tax receipts are plunging and this rarely happens outside of a recession. As businesses and individuals make less money, they pay fewer taxes guaranteeing an economic slowdown and more deficit spending.

Last week, the Federal Reserve Senior Loan Officer Opinion survey showed a further tightening of lending conditions, which in combination with higher interest rates, will be toxic for bank lending. This is going to be a major headwind for economic activity, increasing recession risks that still cannot be ignored.

Americans have also raked in a record $17.05 trillion in debt during Q1 of 2023 alone, while falling deeper into debt with no plans for financial management. Credit card debt is at an all-time high, and the cost of borrowing continues to rise. The average credit card interest rate offered in the U.S. over the last three months of 2022 stood at 21.6%, according to WalletHub, a jump from about 18% a year prior

The rise in credit card rates is attributed to the most aggressive series of interest rate hikes imposed by the Federal Reserve in over 40 years. The increase in credit card balances is a cause for concern, as it could lead to a rise in defaults and adds more risk to a potential recession.

The yield curve of 2-year–10-year and 3-month–10-year remain hugely inverted. The inverted yield curve has predicted a U.S. recession 100% of the time since the 1970s. But historically, recession's do not come until roughly 6–12 months after the inversion bottoms. The gold price has risen 20% on average during past recessions.

In the lead-up to the BRICS summit taking place in Johannesburg on August 22-24, there have been conflicting reports about whether a gold-backed currency is going to be discussed. Although BRICS has been looking at a currency backed by gold, the more immediate goals for the BRICS bloc are to sidestep the SWIFT system with the ability to avoid Western sanctions.

Both China and Russia have been working on an alternative to SWIFT, as well as institutions to challenge the U.S.-dominated IMF and World Bank. Nonetheless, this does not mean the immediate demise of the U.S. dollar as the world’s reserve currency, as there is no obvious successor.

The U.S. dollar remains at least 60% of global reserves, while the U.S. continues to have the deepest and largest capital markets in the world. Nevertheless, BRICS and its plan does pose a potential threat to the U.S. and to the U.S. dollar.

In the meantime, eastern central banks continue to add more gold to their reserves led by both Russia and China. Russia’s finance ministry announced late last week that it would start buying currencies and gold again in August after 18 months of selling or sitting on the sidelines as Moscow looks to profit from recent high oil prices.

The People’s Bank of China (PBOC) bought more gold in July, pushing its current shopping spree to nine consecutive months. Bullion held by the PBOC rose by 740,000 troy ounces, the central bank said on Monday, which is equivalent to about 23 tons. Total stockpiles now sit at 2,137 tons, with around 188 tons added in a run of purchases that began in November.

Although China has become a leading buyer in the precious metal market, many feel the central bank of the world's second largest economy is just getting started. Like many other non-western countries, China wishes to continue reducing its U.S Treasury holdings, with physical gold being the greenback's natural substitute.

Despite Gold Futures closing above $2000 on a monthly basis, the continued relative weakness of both silver and the miners warns of a possible re-test of the $1900 level during the last few weeks of typical precious metals summer doldrums. Sentiment remains low for the entire sector. If the gold price is gearing up for a fourth attempt to breakout above $2100, it is important that silver and the miners begin to lead the way for the move to be sustainable.

In anticipation of the incredible gains the junior sector should begin to experience once the gold price prints a technical breakout above $2100, the Junior Miner Junky (JMJ) newsletter has accumulated a basket of quality juniors with 3x-10x upside potential into 2025-26.

By

David Erfle

Contributing to kitco.com

Time to Buy Gold and silver

Tim Moseley

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The Gold market is stuck in neutral but there are still plenty of triggers

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The Gold market is stuck in neutral but there are still plenty of triggers

The gold market is stuck in neutral and could remain there through the rest of the summer as U.S. economic data continues to support the Federal Reserve's monetary policy tightening bias; however, analysts say that near-term weakness could be seen as a buying opportunity as the market waits for a new spark to trigger a broader rally.

While the gold market has been fairly resilient, with December gold futures holding support around $1,950 an ounce, analysts said that the precious metal still faces a challenging environment, especially as short-term bond yields continue to yield around 5%.

The gold market is seeing its second week of sharp losses. December gold last traded at $1,946.50 an ounce, down 1.5% from last Friday.

"Gold has a lot of competition as a safe-haven asset as the idea of a soft landing in the U.S. economy grows as consensus," said Edward Moya, senior market analyst at OANDA. "The long-term interest in gold is there, but this is going to be a tough environment. Gold will struggle until we see a market risk event."

Ole Hansen, head of commodity Strategy at Saxo Bank, said he also sees gold prices struggling as opportunity costs for holding the precious metal continue to rise. He added that investors are frustrated with holding gold as they liquidate their positions and move into equity markets.

He said that with the U.S. economy remaining fairly resilient in the face of the Federal Reserve's aggressive rate hikes, there is no urgency for investors to get into gold. He added that the gold market is waiting for the right trigger, which could take some time.

Analysts note that markets remain laser-focused on economic data as the Federal Reserve keeps its options open and remains data-dependent. The problem for traders and investors is that the data is still not providing any clear guidance.

This past week's Consumer Price Index shows that inflation is still well above the Federal Reserve's 2% target and looking ahead, some analysts are not expecting U.S. retail sales numbers to provide any new insight into personal consumption.

Analysts also said that the minutes from the Federal Reserve's July monetary policy meeting are also unlikely to provide any solid guidance ahead of September's decision.

Analysts have said that U.S. economic data has to turn decisively negative before interest rate expectations start to shift.

"CPI is still too high for the Fed to be relaxed about inflation for now. Higher carry, and opportunity cost make it very expensive to hold bullion," said analysts at TD Securities. "With gold currently trading at around $1,914/oz, we think that gold runs below $1,900/oz support (fib/200dma) from here, should data remain firm and inflation edge higher due to energy. Longer-term, however, positioning and likely aggressive action on the easing front, once data turns convincingly negative, should catalyze a robust rally which could take the yellow metal into $2,100/oz territory in late 2023-early-2024."

Sean Lusk, co-director of commercial hedging at Walsh Trading, said that despite the near-term challenges for gold, weakness should be bought. He noted that gold still remains well supported in the long term.

Aside from the economic data, the bond market is something that analysts are keeping an eye on, as higher volatility could be the spark that ignites a broader rally. While the U.S. bond market is not expected to see an immediate collapse, analysts said they are looking for cracks.

"At some point, investors need to realize that the government is printing too much money and once they do, gold will rally," said Lusk.

  Gold price to rise as investors lose faith in U.S. dollar – Commodity Discovery Fund's Willem Middelkoop

Hansen said that although the debt burden is not an immediate threat, it remains a significant reason why investors won't want to sell too much of their gold.

Concerns over U.S. debt levels started to grow after Fitch Ratings downgraded U.S. long-term debt. Those fears were sharpened this past week following a disappointing 30-year bond auction.

"This weak auction highlighted for the first time this week the structural issue that the market is struggling to absorb all the new debt sales/issuance," said Nicky Shiels, head of metals strategy at MKS PAMP. "At some point, the U.S. debt issue will matter for gold, but as long as the market plays for larger debt sales (read higher US yields), gold is just another proxy to short/sell.

Price levels to watch

Analysts note that the contango in the gold market, between December futures and spot prices, remains a risk in the marketplace. In this environment, some analysts have said that they expect futures markets will likely have to fall closer to spot prices as economic data has proven to be more resilient than expected, raising expectations that the U.S. will avoid a harsh recession this year.

Analysts have said that critical support in December gold futures comes in between $1,950 and $1,940. Michael Moore, the creator of Moore Analytics, said that gold is headed lower unless there is a decent break above $1,955.30 an ounce.

In the spot market, analysts are expecting gold to test support at around $1,900 an ounce, which also represents the market's 200-day moving average.

Next week's data:

Tuesday: U.S. Retail Sales, Empire State Manufacturing

Wednesday: U.S. Housing Starts and Building Permits, FOMC meeting minutes

Thursday: Weekly Jobless Claims, Philly Fed Survey
 

By

Neils Christensen

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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Bank of Canada finds little reason for Canadians to adopt a CBDC RCMP wants a digital repository for seized crypto

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Bank of Canada finds little reason for Canadians to adopt a CBDC, RCMP wants a digital repository for seized crypto

An investigation conducted by the Bank of Canada (BoC) has found that the average Canadian sees little reason to adopt a central bank digital currency (CBDC), which could lead to problems with such a product being broadly accepted should the central bank ultimately decide to release a digital loonie.

The main focus of the investigation was on the scenario where “the emergence of a cashless society” could warrant the introduction of a general-purpose, cash-like CBDC in Canada

In the event that a cashless society emerges, the BoC determined that “most people, represented by the typical consumer and early adopters, would continue to have their usual payment needs met without cash by using various electronic methods” including digital and mobile wallets. “Technology-averse consumers would have access to fewer payment methods in a cashless environment but could continue to transact using debit and credit cards as well as cheques.”

The BoC made a point to stress that it is “committed to supplying cash as long as demand for it remains,” and “will not unilaterally stop supplying bank notes.”

“If the volume of cash transactions were to fall to a significantly low level, it would not be because of the Bank’s decisions,” the BoC said. “It would result from the cumulative behavior of most consumers, merchants and cash distributors (such as banks and other operators of ABMs) moving away from cash.”

In the scenario where the BoC issues a CBDC focused on providing payment services in a cashless environment, the bank determined that “A universally accessible CBDC that facilitated online purchases could benefit cash-dependent consumers,” especially those who are unbanked, as long as “their access to CBDC did not require a bank account.”

“Currently, most Canadian consumers do not experience gaps in their access to payment methods, and this will likely remain the case in a cashless environment,” the BoC said. “Some people could, however, face difficulties making payments if cash were no longer widely accepted as a method of payment.”

The report said that 98% of Canadian adults have a bank account, 87% have a credit card, and 90% of rural and urban households combined can access high-quality internet.

In order for a CBDC to serve as a cash replacement in a cashless society, it “would need to be widely adopted and used at scale by the dominant consumer groups who face few gaps in meeting their payment needs,” they said. “Such adoption and use would be necessary to motivate merchant acceptance, which, in turn, would encourage further consumer use and merchant acceptance.”

“However, the dominant consumer groups in this analysis may have relatively weak incentives for adopting and using a CBDC, so achieving widespread merchant acceptance could be challenging,” the BoC added.

“As a practical matter, achieving wide adoption, acceptance, and use of CBDC could be challenging because most Canadians have access to several methods of payment using commercial bank money, provided by sophisticated incumbents,” the BoC said. “Overcoming such barriers could require significant and sustained investment by the central bank.”

Instead of releasing a CBDC, the BoC outlined several steps that could be taken to help provide services to the underbanked, including improving internet access, expanding low-cost bank account availability, increasing merchant collaboration with remote communities, and continuing to supply cash.

  Canada's financial regulator updates guidance for crypto asset exposure

RCMP puts out the call for a digital repository for seized assets

In other blockchain news out of Canada, the Royal Canadian Mounted Police (RCMP) and Shared Services Canada (SSC) announced they are looking to develop a digital asset solution “to facilitate the seizure and storage of cryptocurrency and non-fungible tokens (NFTs) from multiple public blockchains.”

“With the rise of new and innovative methods to store and transfer assets, Canadian Law enforcement needs a safe and secure method to identify and seize said assets,” the RCMP said. “This challenge aims to leverage the private sector's innovation to develop a system used by the police to seize and store the ill-gotten gains from criminal activities.”

“The development of a centralized repository solution would allow police officers to seize these assets in a user-friendly manner, while also offering significant security to prevent the theft of said assets during their storage,” they added.

The RCMP listed 17 requirements that would be needed for such a repository, including the ability to process transactions for the top 20 cryptocurrency blockchains by market capitalization and the ability to scale to support new blockchains and NFTs in the future.

The proposed solution should also “Allow officers to query a public blockchain address and view balances and transactions; Present officers with clear instructions on how to seize assets through a step-by-step guide in the application; and Be able to accept and process transactions for the top 100 cryptocurrency blockchains by market capitalization,” RCMP said.

Submissions that receive a ‘Phase 1’ contract can receive up to CAD$150,000 and have 6 months to develop their product. Eligible businesses that successfully complete Phase 1 will be invited to submit a proposal for ‘Phase 2,’ which offers up to CAD$1 million in funding and allows 12 months to submit a final product. The RCMP estimates that it will accept four submissions in Phase 1 and two submissions in Phase 2.

“Final decisions on the number of Phase 1 and Phase 2 awards will be made by Canada on the basis of factors such as evaluation results, departmental priorities and availability of funds,” the RCMP said. “Canada reserves the right to make partial awards and to negotiate project scope changes.”

By

Jordan Finneseth

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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New Use Cases For Bitcoin Ordinal Theory Disturbs Bitcoin Purists Competition For Ethereum?

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New Use Cases For Bitcoin. Ordinal Theory Disturbs Bitcoin Purists. Competition For Ethereum? 

Bitcoin is evolving with the introduction of inscriptions, which has caused an explosion in innovation, creating new use cases for Bitcoin that many thought it would never advocate. Some believe these use cases are inappropriate for Bitcoin's primary mission of decentralizing money and being a store of value. These use cases include BRC-20 tokens, and Ordinal Inscriptions likened to an NFT called Digital Artifacts, and many are wondering whether they will compete with NFTs and ERC-20 tokens on Ethereum. 

This article illustrates what Inscriptions, Ordinals, and BRC-20 tokens are, how they work, and evaluates what impact the Ordinal theory could have on BTC. Also, how will these protocols impact Ethereum? Could ETH lose NFT market dominance as a result? 

When Did It All Start

The history of Bitcoin's recent innovations begins with the Taproot upgrade, which went live in November 2021. Essentially, Taproot removed limits on how much data each BTC transaction can use, allowing a single transaction to fill an entire Bitcoin block. This opened the door to attaching additional data to BTC transactions, including individual Satoshis. (Sats). For context, each BTC comprises 100 million Sats, like cents to a dollar. 


Image Source: Cointelegraph

As the name suggests, inscriptions make it possible to attach data to individual Sats, including audio, video, and text. Bitcoin Ordinal inscriptions can be fungible or non-fungible, depending on who owns the Ordinal and whether they wish to preserve the individual Satoshi. 

The concept of adding data to individual Sats isn't necessarily new. In fact, Bitcoin creator Satoshi Nakamoto and early Bitcoin developer Gavin Andresen discussed creating a domain name system on Bitcoin in 2010. This eventually led to the creation of Namecoin, one of the first Bitcoin forks. In 2012, the CEO of eToro proposed the concept of colored coins, which involves attaching data to BTC transactions to tokenize real-world assets effectively. 

The main reason why these concepts failed to reach mass adoption was because of data limits on BTC transactions, which Taproot has since removed. Another reason why these inscriptions failed to reach mass adoption was because it was challenging to create or keep track of them. This is what the Ordinals protocol does. It allows anyone to inscribe individual Sats with additional data and keep track of where they are. 

Ordinal Protocol and Inscriptions

As stated on the Ordinal website, a Sat inscription is an NFT; however, "digital artifact" is used instead because it's simple and familiar to artists, collectors, and traders. The phrase "digital artifact" is highly suggestive, even to someone who has never heard the term before. In comparison, NFT is an acronym that feels like financial terminology and doesn't indicate what it means if you haven't heard it before.

Bitcoin developer Casey Rodarmor created the Ordinal protocol in late January 2023. In an interview, Casey explained that he'd been considering making the protocol since he saw generative art NFTs on Ethereum in early 2022. Casey wanted to bring similar kinds of NFTs to Bitcoin. However, Casey stepped down as the lead developer of Ordinals in late May and announced a pseudonymous developer named Raph Japh would be taking his place as he couldn't give the protocol the attention it deserves.

Interestingly, Ordinals only need two things to run the protocol: a full Bitcoin node and a Bitcoin wallet that can read and write Ordinal inscriptions. Casey explained in an interview that the Ordinal protocol was designed to require no extra infrastructure; it exists entirely on Bitcoin. Even more interesting about Ordinals is that the inscriptions apparently can't be searched using a browser, at least for now. 

Casey explained that this is because of “instability.” This means that you must search for inscriptions manually on Ordinals.com, which isn't easy because there are many. For reference, there were more than 10 million inscriptions when Casey stepped down from the protocol in late May. It’s not surprising considering that multiple NFT marketplaces had started supporting Ordinals inscriptions, and a new type of inscription was also invented, the BRC-20 token. 


Image source: X [Twitter] Ordinals Wallet

What Is A BRC-20 Token?

The BRC-20 token experiment was introduced by a pseudonymous on-chain analyst named Domo in early March 2023; that enables users to create fungible tokens natively on Bitcoin. However, before launching BRC-20, Domo stressed that the token is “simply a fun experiment.” 

The BRC-20 token standard is similar to the ERC-20 token standard commonly used on the Ethereum blockchain. However, unlike the popular token standards on Ethereum, BRC-20 tokens do not use smart contracts. Instead, users store a script file on Bitcoin and use that to attribute tokens to individual satoshis. BRC-20s embed JSON data into ordinal inscriptions to enable users to deploy, mint, and transfer tokens. BRC-20s are considered “semi-fungible” since users can only exchange BRC-20 tokens in set increments. 
 
BRC-20 tokens have limited functionality compared to their ERC-20 counterparts on Ethereum. Unlike ERC-20s, which can be used as collateral in various dApps, BRC-20s are restricted to minting and moving fungible tokens on the Bitcoin blockchain. This is why there were over 10 million Ordinals but only around 40,000 BRC-20 tokens. Each Sat inscribed with an Ordinal Digital Artifact only contains one image, video, or text, whereas each Sat inscribed with a BRC-20 can have millions of units of a single token.

BRC-20 Memecoin Craze Causes Fees To Skyrocket

Naturally, BRC-20 tokens caused the number of inscriptions to surge, and the subsequent BRC-20 memecoin craze caused transaction fees on Bitcoin to spike. By May, the market cap of BRC-20 tokens had passed $1 billion, with crypto wallets adding support and exchanges listing the biggest ones. The most popular crypto wallet for BRC-20s and Ordinal Digital Artifacts is the UniSat browser extension. The browser wallet has been downloaded over 300,000 times so far. To put things into perspective, the wallet only had 100K downloads in mid-May – a 3X increase in a month.

Screenshot: Chrome Web Store

Meanwhile, the number of non-zero Bitcoin addresses, i.e., the number of Bitcoin wallets holding more than 0 BTC, has gone parabolic over the same period. Bitcoin miners have also been raking it in from the transaction fees. The fees actually surpassed the block rewards for the first time since 2017. At the same time, innovation around both Ordinals NFTs and BRC-20s had increased. 

More Innovations Ensued

One of the most famous innovations happened in February 2023, when a crafty hacker found a way to upload a cloned version of the 30-year-old video game classic DOOM to the Bitcoin blockchain as an inscription on the network’s Ordinal protocol. You can literally play a simplified version of Doom on Bitcoin. 

More recently, another pseudonymous Ordinal developer named Leonidas introduced recursive inscriptions, making it possible for inscriptions to interact. This, in turn, makes it possible to upload playable video games larger than one Bitcoin block and unlocks other new use cases. 

In May 2023, Milady’s NFT enthusiasts launched a new Ordinals NFT standard with the help of an Ordinal Digital Artifact marketplace that makes it possible to bridge NFTs from Ethereum to Bitcoin. The catch is that the conversion is currently a one-way trip, but it foreshadows more interoperability for Ordinal Digital Artifacts and BRC-20s. 

On that note, the first BRC-20 stablecoin was launched in late May. The caveat is that the issuer of this stablecoin appears to be somewhat sketchy. Even so, it foreshadows the launch of more reputable stablecoins directly on the Bitcoin blockchain, likely resulting in even more Bitcoin adoption. 


Image source: BRC-20.io

Bitcoin Maxis Pushing Back

Not everyone is applauding Bitcoin's recent innovation, however. Many have argued that Ordinals are useless. This argument has some merit, considering that some of the earliest Ordinal inscriptions contained unsavory types of content that have since been hidden. Still, as it’s been inscribed into the blockchain, the image itself is immutable.

Some have also argued that BRC-20 tokens are harmful. This is also understandable, considering that they caused transaction fees on the Bitcoin blockchain to spike. It’s made it more expensive for people in developing countries to send BTC transactions, all because some degens wanted to trade memecoins. 

Others have argued that Bitcoin shouldn't be used for anything other than regular peer-to-peer BTC transactions. This is reasonable, considering the Bitcoin white paper says peer-to-peer electronic cash. Never mind that the more complexity you add, the more vulnerabilities you create. 

Crypto analyst Eric Wall explained in an interview that the way the ordinals protocol was coded is akin to an exploit. Crypto VC partner Nick Carter also pointed out in an interview that this unforeseen use of the Taproot upgrade could make the Bitcoin community more hesitant to approve future upgrades. Nick believes that Bitcoin won't be seeing another upgrade for a long time because of the unforeseen risks it will create. 

On the other hand, many, including Nick, have argued that the objectively useless Ordinal Digital Artifacts will be priced out due to the increased transaction fees. It makes sense because whoever pays the highest price has their transaction processed first. People won't continue to pay a high price to inscribe useless data. 

Progressive Bitcoiners Counter

Some have argued that Layer 2s will solve the blockchain bloats supposedly caused by BRC-20s like the Lightning Network. This also makes sense because higher transaction fees on the base chain create an incentive to generate scaling solutions, an incentive lacking in Bitcoin. 

Others have argued that the fees from peer-to-peer BTC transactions alone may not be enough to secure the Bitcoin blockchain as time passes, so additional use cases should be allowed. This makes sense because Bitcoin isn't just a crypto; it's the most secure network in the world, the ideal base layer. It's not just the progressive Bitcoiners saying this, either. Bitcoin OGs like Blockstream CEO Adam Back have acknowledged that Bitcoin can be used for whatever people want. 

Many Ordinal supporters have also noted the technology’s contribution to the freedom of speech. One Bitcoin observer posted on X stating, “I know everyone hates Ordinals, but whether it’s text or images, the ability to publish uncensorable information on the Bitcoin time chain effectively makes speech uncensorable worldwide forever.” 

What matters at the end of the day is the demand for block space and BTC, ideally from objectively valuable use cases. F2Pool CMO Li Qingfei underscored that Ordinals and BRC-20 tokens will eventually give rise to these objectively valuable use cases once all the hype is gone. The consensus is that both innovations are a net benefit and clear advantage to Bitcoin, but it's still too soon to say what's hype and what's here to stay. 

Ethereum Gearing Up for Competition

Many people have pointed out that conversations around Ordinal Digital Artifacts and BRC-20 tokens sound eerily similar to those around the first NFT craze and the ICO boom on Ethereum in 2017. At the time, people were also arguing about Ethereum’s future in light of these disruptive innovations. Some of you will recall how pictures of cartoon cats once caused massive congestion, jamming up the Ethereum network.

You may also know that most crypto projects launched on Ethereum were utterly worthless. Notably, all will appreciate that many of the NFTs and ERC-20s that survived are valuable and useful. Chances are that we will see the same thing happen with Ordinal Digital Artifacts and BRC-20 tokens. This means that Bitcoin could become more akin to Ethereum; if it does, it will make BTC a more direct competitor to ETH, and it appears that ETH has already been gearing up for this direct competition. 

To explain, BTC is considered to be digital gold. This is primarily because BTC's tokenomics make it an ideal hedge against currency debasement and, arguably, inflation – It is “Sound money.” Conversely, ETH is considered to be digital oil. This is primarily because ETH is the fuel that runs Ethereum, which hosts most dApps and tokens. The narrative around ETH started to change in mid-2021 with the EIP1559 upgrade. 

EIP1559 burns a portion of all transaction fees on Ethereum to refresh your memory. With enough activity, this makes ETH deflationary. Hence, the new narrative of ETH is “Ultrasound money.” Obviously, the term is meant to imply that ETH is a superior store of value to BTC due to its deflationary nature. 


Image source: X [Twitter] 

Ethereum’s transition from Proof-of-Work to Proof-of-Stake also made ETH more appealing to institutional investors because they can stake it to earn a yield, and we know institutions love earning yield. Regarding the environmental aspects of Proof-of-Work versus Proof-of-Stake, you should know that ESG-obsessed institutional investors aren't really concerned about the E part. They're worried about the G, the Governance, i.e., the control. Bitcoin can't be controlled, and ESG investors don't like that.

What Makes BTC More Appealing

Given that ETH can be deflationary and earn a yield via staking, it begs the question of what makes BTC more appealing than ETH to investors, particularly institutional investors. Many people have been asking this question lately, especially as ETH continues to change and BTC stays relatively static. The answer to the question is “security.” 

The Bitcoin blockchain is the most secure network in the world, mainly because it is static compared with all the others, which change constantly. It is the ideal base layer on which additional innovations can be built. The only thing missing was the incentives to create them. Ordinal Digital Artifacts and BRC-20s have introduced these incentives and prepared Bitcoin’s ecosystem to see the same explosive growth Ethereum did after NFTs and ERC-20s saw genuine adoption. 

The difference is that Bitcoin’s ecosystem will be much more secure due to its base layer. This is significant because security is the only thing institutional investors love more than token burns and yield. They want to be sure that the tokens they mint on a cryptocurrency blockchain will stay there forever, and Bitcoin arguably provides more certainty than Ethereum here. 

This is for many reasons, including that Proof-of-Work is more secure than Proof-of-Stake. The infrastructure used to interact with Ordinal Digital Artifacts and BRC-20 tokens exists on Bitcoin itself—the fact that Bitcoin doesn't change, and it's been around for much longer than Ethereum. Never mind that BTC is the only crypto the SEC has said is not a security. 

Bitcoin Innovation Risks

As bullish as Ordinal Digital Artifacts, BRC-20 tokens, and other Bitcoin innovations will be for BTC, there will also be risks. This is one undeniable advantage that Ethereum has: it has moved fast, broken things, and fixed them. Bitcoin hasn't broken anything yet, but unlike Ethereum, it can't afford to. 

Many argue that the most significant risks associated with Bitcoin innovation appear to be regulatory. Bitcoin evangelist Michael Saylor believes there could be regulatory risks, mainly for BRC-20 tokens. Like the ERC-20 tokens on Ethereum, Michael thinks that some BRC-20 tokens could be classified as securities by the SEC. It's ironic, considering that BTC itself is supposedly immune from scrutiny. 

Definitively, the most considerable risk associated with innovation on Bitcoin is one that's been overlooked, and that's centralization. As transaction fees on the Bitcoin blockchain rise because of the innovation, more people, mainly those who don't have much money, will switch to using Layer 2 protocols. 

The Lightning Network is Bitcoin’s Layer 2 solution for its renowned slow transaction speed. It consists of payment channels that contain large amounts of BTC. Individual payment channels between various parties combine to form a network of Lightning Network nodes that can route transactions among themselves. The interconnections between different payment channels result in the Lightning Network. 

Unless you have enough BTC and technical know-how to open your own payment channel, you must use a payment channel that a third party of some kind operates. The harsh reality is that sending BTC transactions on the lightning network using a payment channel run by a third party is no different from using a bank to send fiat transactions. 

That's because every BTC transaction is tracked, and you technically don't own your BTC, meaning it can be frozen or stolen. Because of this protocol’s current vulnerabilities, third parties must run on nodes to prevent fraud within the Lightning Network, called a watchtower, which monitors transactions.

Today's gas fees on Ethereum transactions are unaffordable for most people, forcing them to use Layer 2s, which are centralized and controlled by VC investors. It’s fair to say that's not what crypto is about and what anyone wants for Bitcoin, Ethereum, or other cryptocurrencies. All being well, Bitcoin will take a different approach to growing and scaling its ecosystem than other Layer 1s. All it takes is the right incentives. 


Image source: Ordinals Marketplace

In Closing

The developers of the Ordinal theory have expressed that the most essential thing the Bitcoin network does is decentralize money. They acknowledge all other use cases are secondary, including Ordinals. However, they believe that Ordinal theory helps Bitcoin's primary mission, at least in a small way. 

Suppose inscriptions prove to be highly sought-after digital artifacts with a rich history. In that case, they will serve as a powerful hook for Bitcoin adoption: Come for the fun, rich art, and stay for the decentralized digital money.

Ordinals and inscriptions increase demand for Bitcoin block space, which increases Bitcoin's security budget. This is vital for safeguarding Bitcoin's transition to a fee-dependent security model, as the block subsidy is halved into insignificance and ensures that Bitcoin remains secure.

Many hope that the Ordinal theory strengthens and enriches Bitcoin and gives it another dimension of appeal and functionality, enabling it to serve its primary use case more effectively as humanity's decentralized store of value.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.
 
 

 

 

 

 

 

 

 

Tim Moseley

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Gold silver a bit firmer after tame US inflation report

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Gold, silver a bit firmer after tame U.S. inflation report

Gold and silver prices are slightly higher in choppy, two-sided trading at midday Thursday. The metals are supported by a U.S. consumer price index report that came in a bit tamer than market expectations. However, gains are limited as the U.S. dollar index has pushed well up from its early-session lows and as U.S. Treasury yields have up-ticked slightly. December gold was last up $2.30 at $1,952.60 and September silver was up $0.184 at $22.92.

The U.S. data point of the week saw the July U.S. consumer price index up 3.2%, year-on-year, which is slightly below the consensus forecast of up 3.3%. The CPI rose 3.0% in the June report. Meantime, the weekly U.S. jobless claims report came in a bit higher than expectations. These two reports fell into the camp of the U.S. monetary policy doves. Today's data also suggests the Federal Reserve will not raise interest rates at its September meeting. The U.S. producer price index report is out on Friday morning.

Asian and European stock markets were mixed to firmer in overnight trading. U.S. stock indexes are firmer at midday.

A Wall Street Journal headline today reads: "China slips into deflation in warning sign for World economy." This follows a 0.3% drop in China's consumer price index in July.

Another WSJ headline today reads: Sputtering trade fuels concerns about a fractured global economy." This headline follows downbeat China import and export numbers reported earlier this week.

The summertime rally in the U.S. stock market has hit a speed bump, gold and silver prices have dipped, while grain markets have also sold off—all due in part to the slowing Chinese economy creating concerns about less demand for global supplies.

Look for China's central bank to continue to implement economic stimulus measures in the coming weeks, in an effort to prop up the listing Chinese economy. Importantly, if the stimulus does not put a charge into the Chinese economy in the coming few months, the other major economies of the world will start to feel the sting of the slower China growth. Such a scenario would be significantly bearish for raw commodity markets, as China is a voracious consumer of raw commodities. Global stock and financial markets would also likely be negatively impacted by a weakening of the Chinese economy.

  Gold price to rise as investors lose faith in U.S. dollar – Commodity Discovery Fund's Willem Middelkoop

In the coming weeks, keep a closer eye on economic data coming out of China—because the "smart money" in the marketplace will be doing the same and acting upon that data.

The key outside markets today see the U.S. dollar index modestly lower after trading solidly lower and hitting new daily lows following the U.S. CPI data. Nymex crude oil prices are down and trading around $83.50 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.018%.

Technically, December gold futures prices hit a five-week low today. Bears have the overall near-term technical advantage. Prices are in a three-week-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at today's high of $1,963.50 and then at Tuesday's high of $1,972.80. First support is seen at $1,939.20 and then at $1,925.00. Wyckoff's Market Rating: 4.0.

September silver futures prices hit a four-week low today. The silver bears have the overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $24.50. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at $23.255 and then at $23.50. Next support is seen at today's low of $22.665 and then at $22.34. Wyckoff's Market Rating: 4.0.

September N.Y. copper closed down 125 points at 377.10 cents today. Prices closed near the session low. 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 July high of 402.40 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 356.50 cents. First resistance is seen today's high of 383.15 cents and then at this week's high of 387.70 cents. First support is seen at Wednesday's low of 376.45 cents and then at this week's low of 372.65 cents. Wyckoff's Market Rating: 3.5.

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Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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Gold silver weaker on more weak China data technical selling

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Gold, silver weaker on more weak China data, technical selling

Gold and silver prices are down in midday U.S. trading Wednesday, with both metals dropping to four-week lows. The precious metals are pressured by another economic report out of China that suggests less consumer demand for goods and services, which includes metals. Chart-based selling is also featured at mid-week, as the near-term technical postures for gold and silver have turned more bearish. December gold was last down $7.80 at $1,952.10 and September silver was down $0.057 at $22.75.

There was more downbeat economic data coming out of China today. The second-largest global economy has slipped into deflation territory for the first time in two years, due to weaker consumer demand. Chinese consumer prices fell 0.3% in July, year-on-year. The reading was in line with market expectations.

Asian and European stock markets were mixed to firmer in overnight trading. U.S. stock indexes are weaker near midday.

Key U.S. inflation reports this week are also in focus for the marketplace. The July U.S. consumer price index it out Thursday and the producer price index is out Friday. Both the CPI and PPI are expected to uptick just a bit from the June reports.

'If you are going to take big risks, it has to be for big rewards' – Rick Rule on resource investing

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil prices are higher and trading around $84.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.182%.

Technically, December gold futures prices hit a four-week low today. Bears have the overall near-term technical advangtage. Prices are in a three-week-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at today’s high of $1,966.10 and then at Tuesday’s high of $1,972.80. First support is seen at $1,950.00 and then at $1,939.20. Wyckoff's Market Rating: 4.0.

September silver futures prices also hit a four-week low today. The silver bears have the overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at $23.00 and then at Tuesday’s high of $23.255. Next support is seen at $22.50 and then at $22.34. Wyckoff's Market Rating: 4.0.

September N.Y. copper closed up 250 points at 379.15 cents today. Prices closed near mid-range. 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 July high of 402.40 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 356.50 cents. First resistance is seen Tuesday high of 384.20 cents and then at this week’s high of 387.70 cents. First support is seen at today’s low of 376.45 cents and then at this week’s low of 372.65 cents. Wyckoff's Market Rating: 4.0.

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Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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Weak China data sinks gold silver markets

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Weak China data sinks gold, silver markets

Gold and silver prices are lower in midday U.S. trading Tuesday. The two precious metals were pressured following surprisingly weak import and export data coming out of China overnight. A rally in the U.S. dollar index and weaker crude oil prices also weighed on the metals today. December gold was last down $9.60 at $1,960.50 and September silver was down $0.437 at $22.79.

Risk appetite receded following the news that China got some more dour economic data Tuesday, as the world’s second-largest economy saw its exports drop a worse-than-expected 14.5% in July, year-on-year, the steepest decline since the Covid period in February of 2020. Imports in July fell more than expected, down 12.4%. These poor numbers will likely prompt more Chinese central bank stimulus measures soon.

Asian and European stock markets were mostly lower in overnight trading, on the China news. U.S. stock indexes are lower at midday.

Key U.S. and China inflation reports this week are also in focus for the marketplace. The July U.S. consumer price index it out Thursday and the producer price index is out Friday. Both the CPI and PPI are expected to uptick just a bit from the June reports.

  Turkey imposing extra fees and quotas to meet unprecedented gold demand and rebuild reserves while keeping a lid on trade deficit

The key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are slightly lower and trading around $81.75 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.014%.

Technically, December gold futures bears have the overall near-term technical advangtage. Prices are in a fledgling downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at today’s high of $1,972.80 and then at this week’s high of $1,981.70. First support is seen at last week’s low of $1,954.50 and then at $1,950.00. Wyckoff's Market Rating: 4.0

September silver futures prices hit a four-week low today. The silver bears have the overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at today’s high of $23.255 and then at this week’s high of $23.775. Next support is seen at today’s low of $22.72 and then at $22.50. Wyckoff's Market Rating: 4.0.

September N.Y. copper closed down 775 points at 375.75 cents today. Prices closed nearer the session low and hit a four-week low today. The copper bears have the overall near-term technical advantage. A nine-week-old uptrend on the daily bar chart has been negated. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the July high of 402.40 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 356.50 cents. First resistance is seen 380.00 cents and then at at today’s high of 384.20 cents. First support is seen at today’s low of 372.65 cents and then at 368.30 cents. Wyckoff's Market Rating: 4.0.

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Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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Gold silver down amid rising bond yields hawkish Fed-speak

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Gold, silver down amid rising bond yields, hawkish Fed-speak

Gold and silver prices are lower in midday U.S. trading Monday, with silver prices sharply down and hitting a four-week low. The precious metals are seeing selling interest on rising U.S. Treasury yields, hawkish comments from a Federal Reserve official, and as the near-term technical postures for both markets have turned slightly bearish. December gold was last down $8.10 at $1,968.00 and September silver was down $0.491 at $23.23.

Some hawkish “Fed speak” over the weekend also dampened the metals market bulls today. Federal Reserve governor Michelle Bowman expressed the potential need for further increases in U.S. interest rates to successfully lower inflation to the Fed's target of 2%. Despite recent data suggesting a slow inflation trend, Bowman recommended consistent evidence proving inflation is significantly moving toward the 2% target. Additionally, Fed officials Raphael Bostic and Austan Goolsbee analyzed recent jobs data and suggested that the labor market is improving, which might prompt the Fed to reconsider how long they should maintain the current elevated rates.

Asian and European stock markets were mixed in overnight trading. U.S. stock indexes are firmer at midday.

Key U.S. and China inflation reports this week will be the major data points for the marketplace. The U.S. consumer price index for July is out Thursday, followed by the July producer price index on Friday. July CPI is expected to uptick a bit from the June report, seen at up 3.3%, year-on-year, compared to the 3.0% rise in June. The PPI in July is also expected to rise slightly from June.

  Central banks become net gold buyers in June, ending three-month selling streak

Traders will also be closely watching the U.S. Treasury market this week, as prices have been dropping (yields rising).

The key outside markets today see the U.S. dollar index slightly higher. Nymex crude oil prices are lower and trading around $82.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.088%.

Technically, December gold futures bears have the slight overall near-term technical advangtage. Prices are in a fledgling downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the July high of $2,028.60. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at today's high of $1,981.70 and then at $1,992.20. First support is seen at last week's low of $1,954.50 and then at $1,950.00. Wyckoff's Market Rating: 4.5.

September silver futures prices hit a four-week low today. The silver bears have the slight overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the July high of $25.475. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at today's high of $23.775 and then at $24.00. Next support is seen at $23.00 and then at the July low of $22.72. Wyckoff's Market Rating: 4.5.

September N.Y. copper closed down 400 points at 382.75 cents today. Prices closed near the session low today. The copper bulls have the slight overall near-term technical advantage. Prices are still in a nine-week-old uptrend on the daily bar chart, but just barely. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the April high of 418.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the June low of 368.30 cents. First resistance is seen at today's high of 387.70 cents and then at 390.00 cents. First support is seen at last week's low of 382.05 cents and then at 380.00 cents. Wyckoff's Market Rating: 5.5.

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Jim Wyckoff

For Kitco News

Time to Buy Gold and silver

Tim Moseley

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Analysts more bullish on gold following lower job growth higher wage inflation

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Analysts more bullish on gold following lower job growth, higher wage inflation

The gold market rallied following a weaker-than-expected U.S. jobs report for July, which included downward revisions for May and June and strong wage growth, sending spot gold prices from $1931 to an intraday high of $1946.79

The latest Kitco News Weekly Gold Survey showed that the loss of momentum for the U.S. labor market, even as inflation pressures remain in place, had most market analysts bullish or neutral on gold's prospects for the coming week.

This week, 15 Wall Street analysts participated in the Kitco News Gold Survey. Eight of them, or 53%, said they expect to see higher prices for gold next week, while six analysts, or 40%, had a neutral outlook. Only one analyst predicted lower prices for the precious metal over the next seven days, representing 7% of the total.

Kitco Gold Survey

Wall Street

Bullish53%

Bearish7%

Neutral40%

"The U.S. jobs market is slowly cooling, and that's exactly what the Fed wants to see," said Adam Button, Chief Currency Analyst at Forexlive.com. "The market is increasingly comfortable that we are at the terminal rate in Fed funds. When that's confirmed, I think the only place for interest rates to go is down, which is bullish for gold."

Button said gold is already at a fairly elevated price despite strong headwinds from the Fed. "The starting spot right now is around $1940, so how high can gold run in a rate cutting cycle?" he asked. "We've seen high real rates, and when you take a step back and look at how gold has performed during this rate hiking cycle, it's extremely encouraging."

He added that while it's still a little bit early in seasonal terms, by the time Q4 rolls around it will be clear that the Fed is done and that rate cuts are coming in 2024. "That's when I expect gold to take off."

Button said he is also bullish on gold in the short term. "I expect next week's CPI report to emphasize that inflation is contained and will slowly subside, and that should help to lift gold," he said.

Marc Chandler, Managing Director at Bannockburn Global Forex, also sees upside potential for the yellow metal.

"I like gold higher next week," said Chandler. "I think the recent pullback, aided by a rise in rates and a stronger dollar, has run its course. A potential key upside reversal is unfolding after the employment data and gold's decline to a nearly four-week low slightly below $1926 in the spot market. A move back above $1950 suggests potential back toward $1965-$1970."

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, also expects gold to post gains in the coming days. "I am bullish on gold for the coming week," Cieszynski said. "Technically, it looks like the recent rally in USD and correction in gold is ending. If gold holds on to today's gains, we would have a really nice bullish Morning Star candlestick pattern."

And Darin Newsom, senior market strategist at Barchart.com, also saw technical confirmation that gold was poised for short-term gains.

"December gold is in position to complete a bullish key reversal on its daily chart, confirming the short-term trend has turned up," Newsom said. "Thursday's close saw daily stochastics complete a bullish crossover below the oversold level of 20%, a signal the short-term trend was set to change direction. The previous 3-wave downtrend began with a bearish key reversal on Thursday, July 20, with a high that day of $2,028.60."

"All that is needed for December gold to complete its pattern Friday is a close above Thursday's settlement of $1,968.80," he said.

Representing the neutral camp as he did last week, James Stanley, senior market strategist at Forex.com said he expects gold prices to remain in a sideways holding pattern, though he sees next week's inflation data as a key risk event. "Unchanged, but CPI can change that quickly depending on how it hits," he said.

Stanley said this week was another bear trap, and he doesn't see gold ready for a larger breakdown just yet. "USD was really strong and there was an open door for bears, but they didn't walk through it so I have to think the breakdown theme isn't here yet," he said. "The 1980 area is still key, so if we see a lower-high inside of that next week, the bearish case will grow a bit more attractive."

The lone voice of pessimism among market analysts this week was Kitco's own Jim Wyckoff, who said he sees enough evidence to expect gold prices to fall next week.

"Steady-lower as prices are in a fledgling downtrend on the daily bar chart," he said.

Gold prices continued to trade in positive territory on Friday afternoon, but the precious metal was still down 0.25% on the week, with spot gold last trading at $1940.56 at the time of writing.

By

Ernest Hoffman

For Kitco News

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