Gold rises on weaker dollar as investors eye multiple economic reports, including PCE

Gold futures saw modest gains on Monday, primarily driven by a weakening dollar. As of 4:15 PM ET, the most active August gold contract settled at $2,345.90, up $11.20 or 0.48%. The dollar index declined by 0.35% to 105.491, contributing significantly to gold's upward movement.

Investors are bracing for a busy final week of the month, with several crucial economic reports on the horizon. The Conference Board's June Consumer Confidence report, due Tuesday, is expected to show a slight decline to 100, down two points from the previous month.

Thursday will bring a flurry of economic data. The Commerce Department is set to release its third and final revision of the first-quarter GDP, projected to remain steady at 1.3%. Additionally, advance readings for May's goods trade balance and wholesale inventories will be published. Analysts anticipate a 0.1% decline in durable goods orders.

The week's most anticipated report is the May Personal Consumption Expenditures (PCE) data from the Commerce Department. According to a Reuters poll of economists, the headline PCE is expected to remain unchanged month-over-month while showing a 10-basis-point decrease to 2.6% annually.

Investors will closely monitor the Federal Reserve's preferred inflation measure, the core PCE, which excludes volatile food and energy prices. Forecasts suggest monthly and annual readings of 0.1% and 2.6%, respectively, both lower than April's figures.

Several Federal Reserve officials are scheduled to speak throughout the week. Mary Daly, president and CEO of the San Francisco Federal Reserve, addressed the San Francisco Commonwealth Club, emphasizing the need for higher interest rates to curb demand and inflation. Her remarks will be followed by speeches from Fed governors Lisa Cook and Michelle Bowman later in the week.

While economic reports and Fed comments will largely influence gold prices, the CME's FedWatch tool indicates that traders currently see a 67.7% probability of a rate cut in September.

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

NY Fed warns of risk to major U.S. banks, 'something amiss in the banking system,' says Soloway

NY Fed warns of risk to major U.S. banks, 'something amiss in the banking system,' says Soloway teaser image

here is something "amiss" in the U.S. banking sector, says Gareth Soloway, Chief Market Strategist at VerifiedInvesting.com, warning that big institutional players are "unloading" the stocks of big banks.

"I'm hearing a lot of chatter about the big banks unloading bad debt right now, trying to get ahead of some sort of crisis looming," Soloway tells Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "Because interest rates are so high, the amount of losses in mortgage-backed securities potentially rival what we saw in 2008 and 2009. In addition, the commercial real estate market is in tatters. And these are all things that banks are holding on their balance sheets."

Soloway points to the SPDR S&P Regional Banking ETF (KRE), noting the formation of a bear flag pattern since the banking crisis lows of April last year. Watch the video above for Soloway's breakdown.

There has also been a technical breakdown in the stocks of some of the bigger banks, including JPMorgan, according to Soloway.

"This trend line breakdown just started on JPMorgan, Citigroup has already broken down," Soloway added. "There are signs that something is amiss within the banking system, whether it's the bear flag in the KRE or in these bigger banks. There are some bigger players that are unloading the big banks here."

Federal Reserve Chair Jerome Powell commented on the banking sector at the June press conference following the central bank's two-day monetary policy meeting.

"The banking system has been solid, strong, well-capitalized lending. We've seen good performance by the banks. We had turmoil early last year, but banks have been focusing on bringing up their liquidity, bringing up their capital, and having risk management plans in place. So, the banking system seems to be in good shape," Powell said.

Soloway reacted to Powell's comment by pointing out that the Fed Chair would never come out and say there is a big issue in the banking system. "Think about the fire that would spread in the market crash that would ensue if he said that," Soloway noted.

Soloway's warning comes as the New York Fed's Liberty Street Economics blog cautioned of U.S. big banks facing growing spillover risks from non-banks.

During periods of increased market volatility, liquidity demand accelerates, putting pressure on banks as non-banks look for loans and lines of credit. This could trigger "vectors of shock transmission and amplification, forcing authorities to intervene and do so en masse," the post said, adding that the disruptions "could be rather severe."

At the same time, the Federal Reserve pointed to weaknesses in four of the biggest banks on Wall Street regarding how they would handle their own failures.

According to a joint statement released Friday by the U.S. central bank and the Federal Deposit Insurance Corporation, the regulators spotted shortcomings in the so-called "living wills" of JPMorgan, Bank of America, Goldman Sachs Group, and Citigroup.

"For the four banks with an identified shortcoming, the letters describe the specific weaknesses resulting in the shortcoming and the remedial actions required by the agencies," the agencies said.

Soloway also revealed the black swan event investors need to pay close attention to in the year's second half. Watch the video above for insights.

In addition, Soloway shared his technical analysis of gold, silver, and Bitcoin. Watch the video above for his short-term and long-term price forecasts.

Kitco Media

Anna Golubova

Time to Buy Gold and Silver

Tim Moseley

Gold Price News: Gold Rallies as Geopolitics Back in Focus

Gold enjoyed a strong, but somewhat volatile session yesterday, briefly spiking to the two-week (pre-Fed) high of $2,364/toz before profit-taking set in. Still, gold has moved decisively through the 50-day simple moving average at $2,343/toz. If held, next resistance level is at the 7 June high at $2,387/toz. Today’s early trading sees gold at $2,359/toz.

While this latest rally has been framed as an indication of markets’ increasing confidence of US rate cuts later this year, rate markets tell another story. Gold has risen as both US 2-Year and 10-Year Treasury yields have edged up and US Fed Fund Futures pricing in a slightly lower probability of cuts in 2024. While this back up in rates markets has been small, it is certainly not gold supportive. The answer lies elsewhere.

A far more plausible explanation is that markets are now pricing in higher levels of geopolitical risk and gold’s rise has notably been accompanied by an uptick in the safe-haven US dollar.

Investors’ anxiety over French parliamentary elections on 30 June and 7 July have been heightened by the European Commission recommended placing France into an Excessive (budget) Deficit Procedure on Wednesday. This has exacerbated concerns in the French bond market, sending credit spreads against German Bunds to a 7-year high.

Meanwhile, Russia’s President Putin has just signed a mutual defence pact with a nuclear-armed North Korea. It is difficult to argue that geopolitical risk hasn’t risen – with gold a likely beneficiary.

The market calendar for today includes Euro Area, UK and US flash PMI data for June, with a focus on the Prices Paid and New Orders sub-components as lead indicators of inflation and growth respectively.

Mike is a market strategist and media commentator with 30 years of experience analysing precious metals markets. He developed his expertise working as an investment banker in emerging markets such as South Africa, Russia and Chile. His focus on precious metals was extended through subsequent work within private wealth management and his own research consultancy. During this time, he covered the gold, silver, platinum and palladium markets.

Mike Ingram

Time to Buy Gold and Silver

Tim Moseley

Wall Street reaches perfect equilibrium of indecision on gold prices, Main Street maintains optimistic outlook

The gold market saw one of its least dramatic weeks of the year this week, but as has been the case of late, it saved some drama for market participants for the end.

Spot gold kicked off the week trading at $2,332.64, and after sliding to a daily low of $2,311.50 around noon EDT on Monday, it did very little other than set the weekly low of $2,307.38 early Tuesday morning.

So steady and narrow was the sideways churn that by the middle of the day Wednesday, which also marked the Juneteenth holiday in the United States, gold had traded in only about a $20 range and found itself flat on the week.

U.S. traders brought renewed energy to the markets with their return on Thursday morning, driving spot gold from $2,332 in the early morning to the then-high of $2,364.09 by 10:45 am EDT. Gold then traded in its newly elevated range between $2,350 and the weekly high of $2,367.70 until Friday morning’s precipitous decline that saw spot gold slide from $2,363.71 at 9 am EDT all the way to $2,317.70 shortly after 1 pm, leaving traders and investors wondering whether the key psychological support level of $2,300 per ounce would hold into Friday's close.

The latest Kitco News Weekly Gold Survey shows industry experts indecisive about gold’s near-term path, while retail sentiment remains positive.

Marc Chandler, Managing Director at Bannockburn Global Forex, sees geopolitics pushing bullion prices higher next week.

“US rates remain soft and although Mexico’s president-elect has made some market-friendly cabinet appointments, political tensions continue to run high in Europe (EU, France, and UK),” he said. “And we note elevated tension between China and the Philippines.”

Chandler said the slippage in U.S. rates “seems to run against the grain of the rally in crude oil, where the Aug WTI contract reached its highest level since the end of April.”

“The yellow metal is testing the $2368 area, and a push higher could see $2388-$2390,” he concluded.

“BULL,” wrote Mark Leibovit, publisher of the VR Metals/Resource Letter.

“Down,” countered Adrian Day, President of Adrian Day Asset Management. “Gold is in a short-term trading range right now and, after last week’s rally, could pull back next week. The market is in a holding pattern, looking for news on the resumption of Chinese official gold buying as well as clarity on US inflation and employment, which will provide insight into the timing of any rate cut.”

Darin Newsom, Senior Market Analyst at Barchart.com, sees gold prices trending higher next week.

“August gold’s short-term uptrend has turned up on the contract’s daily chart, with August posting a new 4-day high of $2,5379.50 Thursday,” Newsom wrote. “While the early part of next week could see renewed light selling interest, by the time we get to next Friday, the contract should be higher again.”

Newsom said he’s looking for a higher weekly close this week and next, which would constitute a string of three straight weeks against the intermediate-term downtrend on the August contract’s weekly chart. “At that point, based on the Benjamin Franklin Fish Analogy (Like guests and fish, markets start to stink after three days/week/months of moving against the trend), I’m looking for the futures contract to turn down again,” he said.

“The short-term upside target area is between $2,370 and $2,390, with an outside shot at $2,410.”

Analysts at CPM Group are also projecting higher gold prices over the next week or two.

“A wide range of political, economic, and financial market issues are likely to push gold higher, toward $2,400 if not $2,450 during this time,” they said. “A stronger dollar is not likely to be a negative for gold: The dollar and gold are both expected to find strong investor demand as the safer currencies to be in. Silver prices are expected to exhibit strength next week ahead of the July Comex futures delivery period starting on 28 May, which may help pull gold prices higher.”

“The increase may be short-lived, however, and dissipate beyond the first week of July,” the analysts warned.

This week, 14 Wall Street analysts participated in the Kitco News Gold Survey, and their responses produced a perfect equilibrium of indecision about the near-term prospects for precious metals. Five experts, representing 62%, expect to see gold prices climb higher next week, while an equal number of analysts predict a price decline. The remaining four, or 28% of the total, expect gold to trade sideways during the coming week.

Meanwhile, 209 votes were cast in Kitco’s online poll, with Main Street investors maintaining their positive outlook on the yellow metal. 114 retail traders, or 55%, look for gold prices to rise next week. Another 38, or 18%, expected the yellow metal to trade lower, while 57 respondents, representing the remaining 27%, saw prices chopping sideways during the week ahead.

The highlight of next week's economic news calendar is the release of the core PCE price index report for May, as markets will be very interested to see if the Federal Reserve's preferred measure of inflation shows further improvement, increasing the likelihood of interest rate cuts in 2024.

Markets will also receive U.S. consumer confidence for June, the S&P Case Shiller home price index for April on Tuesday, and MBA mortgage applications, new home sales, and the results of the Federal Reserve’s bank stress tests on Wednesday. Thursday will bring the May durable goods report and final Q1 GDP, along with initial jobless claims and pending home sales for May, and the week wraps up with the final University of Michigan consumer sentiment for June on Friday.

There will also be a battery of central bank speakers for markets to tune in to, including the Fed's Waller and Daly on Monday, speeches from Cook and Bowman on Tuesday, and Barkin and Bowman again on Friday.

Daniel Pavilonis, Senior Commodities Broker at RJO Futures, said gold appears to be in its summer doldrums, but there’s a lot more happening under the surface.

“If you look at the retracement of the dollar, the dollar is still moving higher, we're inching our way up there, and we're also looking at energy prices move higher,” he said. “This could cause a rebound in rates, which may put some pressure on gold.”

“But ultimately, we're going to see some major headwinds here coming into the elections, and possibly some flaring up of rates in Europe with the situation in France, and French yields moving higher because of the elections.”

“At the base of it, everywhere you look, in terms of de-dollarization, rates, debt, political instability, I still think this is very, very beneficial for gold,” he said. “But it may take a little bit of a pause here.”

Regarding gold’s slide on Friday, Pavilonis said he thinks it was likely driven by hawkish Fed commentary.

“I think some of it was the Fed talk yesterday, with Brainard, on the possibility of not cutting rates,” he said. “Then, coming into this morning, we had some European data that was maybe weighing on the markets, but then we had the global composite PMI and manufacturing PMI, and I think that ticked a little bit higher.”

Pavilonis said the data is inconclusive right now, and it’s creating a weird situation for market participants. “Are we walking into a recession because rates are too tight, or are they not tight enough?” he asked rhetorically. “Some of the data is just all over the place, and I think it's causing a little bit of uncertainty in the market.”

While Pavilonis sees a lot of global instability pushing gold prices higher in the coming months, as far as next week is concerned, he still thinks the yellow metal could fall further.

“I still think there may be some downside,” he said. “We have that double top up there around $2,440. We come back and we try to make a new high, and we actually make a new low, and then we start grinding higher from the beginning of June, all the way to where we've been over the last couple of days… but the candlesticks on the daily [chart] on futures don't look that great.”

“I think the path of least resistance is to the downside,” he concluded. “Maybe we start getting back down to $2,250, somewhere around there.”

Michael Moor, founder of Moor Analytics, wrote that based on where gold is trading on Friday, the charts are indicating further downside.

“The trade above 23386 (-1.2 tics per/hour) should bring in decent strength,” he said. “Decent trade back below 23520 (-2 tics per/hour starting at 6:00am) should bring in decent pressure. Decent trade below 23249 (+1 tic per/hour) will project this downward $35 minimum.”

And Kitco Senior Analyst Jim Wyckoff said traders appear to be positioning themselves long for next week.

“The near-term technical postures have turned more bullish for gold and silver this week, which is inviting the chart-based speculators to the long sides of the markets,” he said. “Technically, August gold bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the June high of $2,406.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $2,304.20.”

“First resistance is seen at $2,390.00 and then at $2,400.00,” Wyckoff said. “First support is seen at the overnight low of $2,368.60 and then at $2,300.00.”

Spot gold last traded at $2322.89 at the time of writing for a loss of 1.59% on the day and 0.41% on the week.t

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

Gold price testing resistance at $2,350 but largely ignores 5.5% drop in U.S. housing starts

Gold price testing resistance at $2,350 but largely ignores 5.5% drop in U.S. housing starts teaser image

The U.S. housing sector continues to struggle as the construction of new homes falls to its lowest level in nine months.

The gold market is not seeing much reaction to the disappointing data, as the price manages to push above initial resistance at $2,350 an ounce.

Housing starts dropped 5.5% in May to a seasonally adjusted annual rate of 1.277 million units, the Commerce Department said on Thursday. The data came in lower than expected, as economists looked for a rate of 1.37 million units.

Meanwhile, the report said that housing construction compared to last year is down nearly 20%.

The gold market continues to consolidate as it pays little attention to economic data. August gold futures last traded at $2,350.50 an ounce, up 0.15% on the day.

At the same time, a further decline in building permits issued last month does not bode well for a sustained recovery in the housing market anytime soon. The report said that building permits for future homebuilding declined 3.8% to a rate of 1.386 million last month, compared to April’s revised estimate of 1.444 million permits.

The issuance of building permits is down 9.5% for the year.

Although the latest housing data continues to disappoint, it has not surprised many economists as the sector faces some significant headwinds.

The Federal Reserve’s aggressive monetary policy stance has kept mortgage rates elevated. At the same time, a lack of supply has pushed home prices higher, pricing many potential home buyers out of the marketplace.

Relief for the housing market could come after the summer as markets expect the U.S. central bank to cut rates in September.

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

Tim Moseley

Gold and silver caught in prolonged consolidation but prices will head higher – Saxo Bank

Although gold and silver are stuck in neutral at elevated levels, one market analyst remains a long-term bull on precious metals.

le Hansen, Head of Commodity Strategy at Saxo Bank, published a report Tuesday saying investors and traders are just catching their breath after the market’s nearly $250 rally from its February lows to its peak above $2450 an ounce last month.

Hansen added that although gold has lost some momentum, there is very little bearish sentiment in the marketplace as investors and money managers see no urgency to take profits.

He explained that many hedge funds jumped into gold when prices were still below $2,200 an ounce. This sentiment is helping gold hold sticky support at around $2,300 an ounce.

“It is clear that the bulk of the run-up in prices back in February and March was supported by strong demand from managed money traders, such as hedge funds. Having joined the rally at an early stage, they have subsequently not been forced to adjust (sell) positions as the current correction phase has kept prices above levels that otherwise would have forced them to reduce their exposure,” he said in the report.

“Getting on board early and at much lower levels helps explain why the current gold volatility is relatively low compared with other metals such as silver, platinum, and copper, where speculators joined a bit later and at higher prices, leaving them more exposed to long liquidation and with that, the risk of a deeper correction,” Hansen added.

Looking ahead, Hansen said that one of the biggest pillars of support in the marketplace comes from gold’s role as a safe-haven asset and hedge against market risks as geopolitical uncertainty continues to impact the global economy.

At the same time, Hansen said that growing sovereign debt is also forcing central banks to continue to diversify their foreign reserves away from the U.S. dollar.

As to how long gold and silver’s prolonged consolidation will last, Hansen said that is up to the Federal Reserve. He noted that while retail investors in Asia and central banks continue to support the market, it is still missing a key component: investor demand.

“Gold and silver continue to see limited interest from ETF investors who have remained mostly net sellers since 2022 when the FOMC began its aggressive rate-hiking campaign, raising the cost of carry, or opportunity cost, of holding a non-coupon-paying metal investment. Demand from ETF investors will likely remain subdued until interest rates are lowered, and this cost is reduced,” he said.

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

Tim Moseley