Gold Versus Savings Accounts: How To Safeguard From Inflation

Key takeaways:

Gold can protect investors from the devaluating effects of inflation

Savings accounts deliver returns only if interest rates are higher than inflation

Digital gold can offer the best of both worlds: underlying appreciation plus yield

Choosing the right investment

When choosing how to invest money, an investor may want to consider several factors including: purpose, individual goals, age, expected period of investment, attitude to risk, personal beliefs, and whether urgent access to capital may be required.

Investors who are within the middle-aged bracket may have already built significant wealth and be looking for ways to balance the risks associated with holding wealth in assets other than property or a pension. For example, those investing in higher-risk assets such as equities may want to balance or hedge those risks by holding some of their capital in safer investments such as cash, bonds, precious metals or other assets.

But even within the category of safe investments, different attributes may affect an investor’s choice.

Two obvious safe investment options are holding cash in a savings account and investing in gold, as neither of these approaches to storing value are at risk of catastrophic losses that can and do occur in higher-risk investment assets such as stock markets.

Investing in gold

There are several ways to invest in gold. Perhaps the most obvious is purchasing physical metal such as bullion-grade coins or bars and storing them in a safe location, be it domestic or via a third party. But investors can also gain exposure to gold through other forms of investment, such as exchange-traded funds (ETFs) or buying shares in gold mining companies, either directly or as part of a managed fund, for example.

Physical gold has been recognised as a store of value for thousands of years across multiple continents, and this is due to several of gold’s fundamental attributes:

Scarcity: total global above-ground supply of gold is estimated at around 212,000 tonnes, according to the World Gold Council’s report which can be found here. Gold’s available supply cannot easily be increased and unlike currency, governments cannot print more of it

Resilience: gold is near indestructible, with natural resistance to oxidation and corrosion

Beauty: gold’s unfading warmth and lustre has made it highly sought after for thousands of years as a store of wealth

Portability: gold’s high value-to-volume ratio makes it an extremely efficient and portable store of value

Flexibility: gold’s malleability and ductility, combined with its rarity, have made it ideal as a metal for jewellery, making it a symbol of wealth and status

This unique combination of attributes has made gold a reliable store of value for thousands of years, meaning the yellow metal has transcended cultural and linguistic barriers, becoming recognised as money in almost all countries.

For these reasons, gold is relevant to investors seeking to diversify their investments and to build in stability as a cornerstone of their portfolio.

What are investment savings accounts?

Investment savings accounts are accounts that allow cash to be held, earning interest over time. This can include high-yield savings accounts, which earn a higher level of interest than standard savings accounts, or money market accounts, which can offer a combination of features normally associated with savings and checking accounts.

Investment savings accounts typically provide a rate of return that is similar to or linked to the underlying base rate set by a central bank. In recent years in the UK, banks have offered rates of 0.5% to around 4% for standard savings accounts, with the higher end of the range often linked to a fixed period of investment in which the saver agrees not to withdraw funds, or may only make limited withdrawals. Individual Savings Accounts (ISAs) offer a similar product while exempting the holder from paying tax on the earnings, up to an annual deposit limit of £20,000 per person.

These accounts are therefore appropriate for experienced investors seeking low-risk, steady returns.

Comparing gold and investment savings accounts

Throughout history, gold has been very effective at holding its value, and the nominal price of gold has tended to rise as governments debase their fiat currencies by increasing the total money supply. This means that as the value of currency slowly erodes, gold maintains its purchasing power.

Gold traded in a range of approximately $600 to $800 an ounce in 2007. However, as governments deployed quantitative easing after the Global Financial Crisis of 2008- effectively creating money to deflate debt- gold prices began to rise, eventually reaching over $2,500 an ounce by August 2024. That’s not to say gold’s trajectory was one way: the yellow metal fell from around $1,800 an ounce in 2011 to below $1,100 an ounce in 2015. However, the long-term trend for gold has been positive as inflation continues to erode the purchasing power of currencies.

Savings accounts, on the other hand, may not offer the same spectacular returns that gold has managed in some years, but they do provide a steady and reliable return that may suit an investor wanting predictability, a low-risk profile and instant access to their cash.

However, new systems have emerged which offer the best of both worlds: the reliable store of wealth offered by physical ownership of precious metals and the returns for holding them in a platform account. Kinesis is an online gold trading platform which offers precious metals trading and a yield on gold and silver held in an investor’s platform account. Find out how investors can access the appreciating value of precious metals and a yield on physical gold and silver here.

Future growth

Gold certainly has the potential to reach new highs in the future. Factors affecting gold’s future performance include scarcity, central bank demand, investor demand, central bank interest rates, economic conditions, stock market performance and declining faith in fiat currencies. With growth in emerging markets and an expanding world population, there is likely to be more money chasing a finite supply of gold – a factor that certainly could propel the yellow metal to as-yet-unseen highs.

Investors can access physical gold fairly easily through a specialist dealer, requiring little more than personal details and proof of identification, while access to ETFs would normally require the opening of an account with an exchange and/or a broker, and payment of fees, depending on the provider.

Digital gold

‘Digital gold’ trading, or ‘gold-backed digital currency’ options are also available, offering a simple and cost-effective way to own physical gold through an online account that includes the physical storage of an equivalent volume of gold in safe, insured and audited vaults.

Savings accounts are arguably easier to open and manage, although some accounts may include certain restrictions on how much capital can be withdrawn in a given year, or how frequently.

Gold can offer protection against inflation, as its value tends to rise as currencies become weaker. Savings accounts can also offer an effective hedge against inflation, but this is only true if the interest rate on the account is greater than the underlying rate of inflation. Inflation can therefore undermine the claims that a savings account provides a return. Once the inflation-adjusted returns are calculated, a cash account may even return a loss in terms of purchasing power.

More details on inflation-adjusted returns can be found here.

Historical Performance

Over the last 10 years, $20,000 in cash held in a savings account at an interest rate of 4% per year would have grown to $29,605, excluding any tax on those returns, and assuming the rate of interest hadn’t changed during the period. In reality, at some points during this period, savings accounts offering 4% would have been hard to find, but the value reflects products on offer at the time of publication.

Ten years ago (mid-August 2014), spot gold prices traded at around $1,310 an ounce. At the time, that same $20,000 would have purchased 15.27 troy ounces of gold. At today’s price of over $2,400 an ounce, that stack of gold would be worth $36,641 – an investment that returned $7,036 more than the same sum held in the cash account. That equates to an annual return of about 6.25% for gold, compared with the cash account at 4% per year.

This example does not prove that gold will always outperform cash, and past performance does not guarantee future returns. But it does demonstrate gold’s ability to maintain its purchasing power in the face of inflation and currency devaluation.

Pros And Cons

To summarise, let’s look at the pros and cons of each type of investment.

Gold’s benefits include its inherent scarcity: governments cannot increase the supply at the stroke of a pen. Gold can also protect an investor from the corrosive effects of inflation, which slowly eat away at the purchasing power of cash.

On the other hand, physical gold does not earn any interest or ‘yield’. Moreover, gold prices can fall in certain situations, particularly during times of high interest rates, which increase the opportunity cost of holding non-yield-bearing assets. Gold prices can also fall during times of stock market strength when equities may provide a more attractive return than physical assets. If stored at home, physical gold can also represent a security risk, while secure storage and insurance offered by a third party carry a cost.

Savings accounts meanwhile, provide a steady and reliable return on investment, and while this may be lower than the returns available from other assets, holding cash is a very low-risk way to build wealth. Setting up a savings account is also a very straightforward process, and easy access to cash is a further advantage.

On the downside, savings accounts can leave the investor exposed to central bank interest rate decisions, which tend to influence the rates offered by savings account providers. At the same time, savings accounts don’t add to the purchasing power of the sum held unless the interest rate on offer is higher than underlying inflation, which can make savings accounts less rewarding than they might appear at face value.

Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.

Time to Buy Gold and Silver

Tim Moseley

Ignore U.S. dollar volatility and focus on gold in euro terms as prices test April highs – MKS’ Nicky Shiels

Ignore U.S. dollar volatility and focus on gold in euro terms as prices test April highs – MKS’ Nicky Shiels teaser image

Gold continues to consolidate around its recent record highs above $2,500 an ounce, but its bullish momentum is at risk as the U.S. dollar appears oversold. However, one market analyst suggests that investors should pay attention to another gold/currency cross to determine the precious metal’s true trend.

In her latest note, Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, said she is paying more attention to gold against the euro as it trades near record highs. She noted that XAUEUR is a good proxy for “gold-only” demand, as it removes the broader U.S. dollar volatility.

While the U.S. gold futures market is closed Monday for the Labor Day long weekend, spot gold against global currencies continues to trade. Gold is trading in neutral territory against the euro, at €2,259.60 an ounce, roughly unchanged on the day.

Shiels warned that gold is trading at a critical resistance level against the euro, which could set the stage for a broader trend.

“XAUEUR has been sitting comfortably in a broad ~€150 range since the large breakout in March and April this year,” Shiels said in her note. “XAUEUR is extremely toppy in the high €2200s; there have been six failed attempts in the €2270-2280 range since the April peak and all-time high in euro terms at €2287/oz.”

Although gold has been unable to break above its March/April highs, Shiels noted that the precious metal appears to be building a solid base around €2,200 an ounce. She said that even as prices consolidate, gold has maintained an upward bias against the euro. She added that in this environment, investors should look to buy the dips.

“Time is somewhat ripe for a rerating (up or down)—it’s been six months since the March breakout—but we don’t think the top is in yet. There is still ‘oomph’ in the XAUEUR as a proxy for real demand trading strongly, and this isn’t an environment to counter longer-term trends just yet. Sure, there’ll be tactical reversals, but calling the gold top at $2500/€2300 is premature,” she said in the note.

The gold market has been building broad bullish sentiment in the last month as markets prepare for the Federal Reserve to start its highly anticipated easing cycle. Market expectations for a 25-basis-point move and a growing outside chance of a 50-basis-point cut have pushed gold prices above $2,500 an ounce.

Growing expectations for aggressive easing caused a sharp selloff in the U.S. dollar; however, many analysts have said that a 50-basis-point move is unlikely, which could provide some support for the dollar in the near term.

At the same time, gold remains supported in euro terms. Markets expect the European Central Bank to cut interest rates again in September as inflation pressures continue to cool.

Kitco Media

Time to Buy Gold and Silver

Tim Moseley

Wall Street evenly divided between bulls, bears, and the fence, Main Street cooler on gold’s potential gains

After a series of dramatic performances throughout the summer, gold traders were treated to a relatively calm and steady week as, with the exception of a couple of dips, the precious metal traded within a $25 range above $2,500 per ounce.

Spot gold kicked off the week trading just above $2,514 per ounce before rising to $2,525 during the European trading session on Monday. The North American open saw the yellow metal driven down to $2512 by 11:15 am EDT, and by early Tuesday morning, spot gold had fallen to the then-weekly low of $2,505 per ounce. This time, the North American trading session provided the upward momentum, helping to propel gold prices to their weekly high above $2,525 per ounce shortly after 7:00 pm EDT before the Asian session delivered a perfect reverse image of the day's gains.

Wednesday morning saw spot gold hit its weekly low of $2,496 before it once again bounced back up to the $2,505 range, which acted as a magnet for gold's price action throughout the week. From there, gold prices went on an upward march, topping out above $2,523 per ounce by 6:00 am Eastern on Thursday before a sharp sell-off coinciding with the release of the second estimate of U.S. Q2 GDP and the weekly jobless claims report saw it once again return to the $2,505 level at 8:30 a.m. But by 1:00 p.m. Eastern, gold was once again trading at its weekly high close to $2,527 per ounce, and after a modest slide during the Asian session, European traders pushed it close to that level once again.

Friday morning brought the week’s most anticipated economic indicator, the U.S. PCE price index report for July which, even though it was in line with economists’ expectations, still saw the yellow metal slide all the way down to a fresh weekly low of $2,494.21 per ounce just after 1:15 pm Eastern.

Gold prices returned once again to the $2,505 level and continued to hover right around support at $2,500 per ounce for the duration of Friday's trading session.

The latest Kitco News Weekly Gold Survey saw retail investors reining in their recent bullishness on gold prices, while industry experts were evenly distributed across the sentiment spectrum.

“Up,” said Adrian Day, President of Adrian Day Asset Management. “As we get close to the Federal Reserve’s rate cut, momentum will likely build. The first rate cut in the cycle has been a bullish signal for gold for the last 20+ years, and although it’s already priced in to some degree, I still expect a positive reaction.”

“I like gold lower next week,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “The upward momentum stalled. If the markets move to hurt most of the people most of the time, maybe the pain trade now is a sequential improvement in US jobs creation and a tick lower in the unemployment rate. This could extend the dollar’s upside correction that began in recent days and push up US rates. I can envision a move toward $2470-75.”

“Sideways,” said Darin Newsom, Senior Market Analyst at Barchart.com. “I’m getting no clear read on Dec gold’s daily chart as we approach the end of the week/month Friday. Given that, I’m going to go with a sideways trend next week, looking for a breakout in either direction.”

Phillip Streible, Head of Market Strategy at Blue Line Futures, is bearish on gold but said that any corrections are expected to be shallow and present buying opportunities. He added that September is a terrible month for gold historically, so traders should look for opportunities to buy, but don't want to be overweight.

Bob Haberkorn, Senior Commodities Broker at RJO Futures, was looking at the price action in light of the sideways churn this week.

“$2,500 is the handle, and it's naturally going to be a spot that people will trade around,” he said. “People are looking to buy below $2,500, and the way the market moves with stops and limit orders, it'll naturally trade around there, but I think $2,480 looks to be more of a support level.”

“We're down today just because the dollar's up, it's risk-off heading into the long weekend,” he added. “That's how it feels with all these markets today, there's just people clearing positions out of anything to wait and see into next week.”

Looking ahead to next Friday’s employment data, Haberkorn said even if the nonfarm payrolls report is bad, he thinks it's very unlikely that the Fed would cut by 50 basis points to kick off their easing cycle.

“I think right now there's just so much pressure that's built up for rate cuts, Powell tipped his hand that it's coming here, and the market's not going to be surprised,” he said. “But I think to get a 50-basis point cut… I don't think we're there, and I don't think, with the inflation numbers and with some of the housing numbers that we've seen, I just don't think it's going to be possible between now and the next meeting to do 50.”

Haberkorn said the most likely scenario he sees is that the Fed delivers one 25 bps cut, then sits back and watches. “I think we're more likely to see a quarter, then they hold off a little bit to see how things go,” he said, “Inflation is still here, people are still feeling the pain of inflation, and I don't think the job's finished.”

“They have 25 points coming at the next meeting,” he said. “If it wasn't an election year, I think they'd be waiting to see, but because we have an election coming up here, and there is a lot of political pressure right now to start cutting rates, I could see them doing two quarter-point cuts between now and November.”

“The quarter-point cut in itself is just the Fed throwing out some charity,” he added. “‘We'll give you a quarter, leave us alone for a little bit.’ That's what it feels like to me, because I don't think they're anywhere near to their targets, or where they need the numbers to be with the inflation, to do anything drastic.”

This week, 15 analysts participated in the Kitco News Gold Survey, and no one view on the price action held sway. Five experts, or 33%, expect to see gold prices rise during the week ahead, while another five analysts believe gold will trade lower next week. The remaining five experts predicted sideways trading for the precious metal.

Meanwhile, 199 votes were cast in Kitco’s online poll, with Main Street investors remaining bullish on balance, but less so than last week’s poll. 112 retail traders, or 56%, looked for gold prices to rise next week. Another 47, or 24%, expected the yellow metal to trade lower, while 40 respondents, representing the remaining 20%, saw prices consolidating during the week ahead.

After the past week was dominated by the runup to Friday’s inflation data, market participants will be focused on employment indicators next week when North American markets return from the long weekend.

On Tuesday, markets will receive the U.S. ISM Manufacturing PMI for August, and Wednesday brings the Bank of Canada’s monetary policy decision and U.S. JOLTS Job Openings. Then on Thursday, traders will be watching ADP Employment for August, the weekly jobless claims report, and the U.S. ISM Services PMI.

But the big risk event next week is the Friday morning release of U.S. Nonfarm Payrolls for August, which some market experts believe has the potential to bump the Fed’s expected September rate cut from 25 to 50 basis points.

Adam Button, head of currency strategy at Forexlive.com, believes the chances of a larger cut from the Federal Reserve will depend on the unemployment rate in the payrolls report.

“Powell was clear that he doesn't want to see any further deterioration in the labor market,” he said. “If we see the unemployment rate tick up one tick, it'll make it a tough call. The consensus is down to 4.2% from 4.3%. If we were to see a two-tenths miss, if we were to see 4.4% or 4.5% unemployment… you’ve just got to go back to March and you're at 3.8%, now you're at 4.3%. It's come up quick.”

“At 4.5%, I’d put it at 60 percent [chance] for 50 basis points,” he added. “I think the unemployment rate is where you want to watch.”

On the question of whether a September rate cut would be a one-off followed by a pause, or the start of a steady easing cycle, Button said he believes it’s the latter.

“I think Powell was clear that the plan is to bring rates down to neutral and it's really a question of how quickly we get there,” he said. “Given the signaling, I don't see how [the Fed] could take October off the table.”

Button agreed that Powell wouldn’t stubbornly hold off on signaling rate cuts meeting after meeting, then finally say they’re ready to ease at the highest-profile speech outside of an FOMC meeting, only to deliver a one-off rate cut.

“Also, you had other Fed officials saying ‘gradual’ or ‘measured’ or something along those lines,” he added. “He didn't say that. I think the key thing was what he didn't say. He didn't say gradual or measured. And then, to top it off, you had Daly, previously she had said ‘gradual’, and then she got teed up to say it again and didn't. She's a bit of a mouthpiece for Powell.”

“And that's it. They want 50 on the table,” he said. “You don't put 50 on the table if you're not planning to do 25.”

Turning to the price action for gold, Button said September’s seasonal weakness could provide fence-sitters with a good entry opportunity.

“I'm just waiting for a dip,” he said. “I don't think anyone's fooling themselves that we're going to see $2,000 again, $2,000 is a dream. $2,300 is maybe realistic.”

“$200 was about the dip you got last year,” he added. “It was more like $300 if you really go tip to top, but it unfolded a little more slowly. I think that's probably the best you can hope for, $2,300, and an outside chance you get back to $2,100. I'd be pretty aggressive if it gets to $2,300. And for next week, something like $2,440.”

Alex Kuptsikevich, Senior Market Analyst at FxPro, sees gold prices attempting to break out of their recent triangle chart pattern.

“Gold has hit a glass ceiling at $2525 an ounce on the spot market, which it has been battling against for the past two weeks,” he said. “A series of smaller and smaller pullbacks and more frequent rallies to the resistance indicate impressive buying pressure. Under these conditions, we should expect a breakout to the historical highs soon, but it will be important to watch how the price behaves afterwards.”

Kuptsikevich said that over the past two weeks, a triangle of horizontal resistance and rising support has formed on the gold chart.

“This is a clear indication that buyers are taking the initiative at increasingly higher levels,” he wrote. “The same conclusion can be drawn if we look at the longer-term chart period since April, when the trend of increasingly shallow corrections continued. The current consolidation is an oscillation around the upper boundary of the uptrend since then.”

He noted an ongoing divergence between the RSI and the price trend, which he characterized as a sign of upward exhaustion. “However, we saw a similar situation from October 2023 to February 2024, which was followed by a strong uptrend rather than a short-term uptrend,” he noted.

“One of the main drivers of the gold price over the past two months has been the dollar's near 5% weakness against a basket of major currencies, which largely explains the 8.5% appreciation in the ounce,” Kuptsikevich said. “However, we note that the DXY is attempting to reverse its direction to the upside as it reaches the lower end of its trading range in early 2023.”

Taken together, he said that these signals “point to a likely near-term break of resistance with a renewal of historical highs, which could be followed by a medium- or even long-term reversal in the dynamics of the gold price.”

“If we take a look beyond the charts, gold's short-term fate will be determined by the Fed's monetary policy outlook: how much it will cut interest rates before the end of the year,” he concluded. “The monthly Employment report on September 6th and the CPI on the 11th will help clarify the answer.”

“Down,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Have hedge long positions. Looking for a correction.”

Moor Analytics Founder Michael Moor believes the risks to gold prices are skewed to the downside, but the yellow metal could still post gains in the near term. “The trade back below 2558 (+3.3 tics per/hour) warns of renewed pressure. The trade below 25417 (+2.5 tics per/hour starting at 5:00am) further warns of pressure: but if we break back above decently, look for decent strength. Decent trade above 25537 (-1 tic per/hour starting at 5:00am) will warn of decent strength.”

Ole Hansen, Head of Commodity Strategy at Saxo Bank, expects gold to trade lower during the week ahead. “Gold is running low on energy, so looking for consolidation/correction ahead of Sept FOMC meet,” he said.

And Kitco Senior Analyst Jim Wyckoff still sees a favorable picture for gold prices next week. “Steady-higher as charts remain bullish, fundamentals remain friendly,” he said.

At the time of writing, spot gold last traded at $2,503.19 per ounce for a loss of 0.71% on the day and 0.35% on the week.

Kitco Media

Ernest Hoffmanr

Time to Buy Gold and Silver

Tim Moseley

Gold eases from record levels as the dollar and yields rise

Gold prices have retreated from recent record highs as rising yields and a strengthening dollar suggest a potentially less aggressive rate cut by the Federal Reserve. This shift comes amid a series of economic indicators that suggest a less aggressive rate-cut by the Fed next month.

The U.S. Bureau of Economic Analysis recently revised its estimate for second-quarter GDP growth to 3%, up from the initial reading of 2.8%. This upward revision underscores the economy's resilience despite prevailing high interest rates, challenging assumptions about the immediate need for monetary policy easing.

The latest Personal Consumption Expenditures (PCE) index report, a key inflation indicator closely watched by the Federal Reserve, has further complicated the economic landscape. The report revealed that consumer spending increased by a robust 0.5% last month, aligning closely with economists' expectations.

The PCE price index rose 0.2% in July and 2.5% year-over-year, while core inflation, which excludes volatile food and energy costs, increased by 0.2% monthly as anticipated. However, the 12-month core inflation figure came in at 2.6%, slightly below the estimated 2.7%.

This PCE report will be the last one available to the Federal Reserve before its September 17-18 Federal Open Market Committee (FOMC) meeting. While Fed officials will get the latest Consumer Price Index (CPI) report on September 11, the core PCE remains their preferred inflation measure and is likely to carry more weight in their deliberations.

Attention now shifts to next week's jobs report, which will play a crucial role in shaping expectations for the September rate decision. Federal Reserve officials will scrutinize the August hiring numbers for any signs of continued labor market contraction, with particular focus on the latest unemployment figures.

A worsening unemployment rate could incentivize the Fed to cut rates more aggressively in an attempt to cushion the economy from the potential repercussions of a cooling job market.

The dollar gained 0.34% taking the index to 101.738. Dollar strength, coupled with rising yields, contributed to the decline in gold prices today. As of 4:45 PM EDT, the most active December gold futures contract was fixed at $2,535.70, representing a daily decline of $18.80 (-0.74%).

For those who wish to learn more about our service, please go to the links below: Information, Track Record, Trading system, Testimonials, Free trial

Wishing you as always good trading,

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

Gold, silver boosted by bullish charts

Gold and silver prices are higher in midday U.S. trading Thursday, with technically based buying from the speculators featured amid bullish charts. December gold was last up $17.50 at $2,555.20 and September silver was up $0.259 at $29.46.

Traders are looking ahead to Friday’s personal income and outlays report, including its inflation gauges that Fed officials monitor very closely.

U.S. stock indexes are solidly higher near midday and have made good rebounds from their August lows.

The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are up and trading around $76.00 a barrel. The benchmark 10-year U.S. Treasury note is presently fetching 3.871%.

Technically, December gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,600.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,475.00. First resistance is seen at this week’s high of $2,564.30 and then at the contract high of $2,570.40. First support is seen at today’s low of $2,536.50 and then at this week’s low of $2,527.80. Wyckoff's Market Rating: 9.0.

September silver futures bulls have the overall near-term technical advantage as prices are in an uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $31.00. The next downside price objective for the bears is closing prices below solid support at $28.00. First resistance is seen at $30.00 and then at this week’s high of $30.225. Next support is seen at this week’s low of $29.08 and then at last week’s low of $28.795. Wyckoff's Market Rating: 6.0

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

Tim Moseley

The [gold] ship is crowded. Do you have a slot secured on the lifeboat?’ – TD Securities’ Ghali

The long gold trade is more crowded than ever, and despite the strong macro environment and imminent Fed rate cuts, the risk of a significant price pullback is growing by the day, according to TD Securities’ Senior Commodity Strategist Daniel Ghali.

In a research note published Monday, Ghali said that even though the Federal Reserve is almost certain to cut its benchmark interest rate at the upcoming September meeting, the chances of a correction in the gold market are increasing every day.

“Our gauge of macro fund positioning in Gold is now at the highest levels recorded in the depths of the pandemic,” he wrote, adding that market positioning has reached “the local highs set in Sep 2019, and previously in Jul 2016. Symmetrically, extreme short positioning from this cohort marked the lows in 2018 and 2022,” he noted.

“This time around, CTAs are also max long and Shanghai traders' net length has also inched towards record highs,” he said. “Algos are also vulnerable in silver, with most scenarios for prices pointing to selling activity on the horizon, barring a break north of $31.5/oz.”

Ghali said the current setup is “the antithesis to the early-year dichotomy in positioning that helped to propel Gold on its trajectory towards current all-time highs.”

“Downside risks are now more potent,” he added. “The ship is crowded. In fact, it has scarcely been as crowded as it is today. Do you have a slot secured on the lifeboat?”

In a follow-up note published Tuesday, Ghali characterized gold markets as “unanimously bullish” with visible short positions hovering near ten-year lows, driven by high deficits, slowing growth, sticky inflation, currency devaluation, and the imminent start of theFed’s rate-cutting cycle.

Reiterating that macro fund positioning has reached the heights seen during the worst days of the Covid-19 pandemic, he observed that “It is more statistically consistent with deep recession cuts than it is with normalization cuts, or alternatively may be bloated due to geopolitics, deficits, or any number of the bullish narratives touted above.”

“What is clear is that macro funds have scarcely held more Gold than they do today,” Ghali said. “CTAs are also effectively 'max long.' Chinese ETF outflows have resumed. Shanghai trader positioning near record-highs already reflects Gold’s allure in the face of a weaker domestic currency, stock and property market.”

Despite all the economic headwinds facing Chinese investors, “Asia is on a buyer's strike in physical,” he noted. “Visible short positions remain near decade-lows. Narratives in Gold markets are unanimously bullish. We see significant risks to the near-term outlook tied to positioning, despite the strong fundamental backdrop.”

After setting fresh all-time highs last week, gold prices have since pulled back somewhat, with spot gold twice dipping below $2,500 per ounce during Wednesday’s session. Spot gold last traded at $2,507.60 per ounce for a loss of 0.68% on the daily chart.t

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

The goal of net zero by 2050 can lead to a "global homicide" as the world is looking at an energy crisis, according to Alex Epstein, philosopher, energy expert, and author of 'Fossil Future,' who says the framework in which fossil fuels are viewed needs to be reframed, adding that the benefits outweigh the side effects, especially in the context of human flourishing and technological progress.

The United Nations has been leading the charge for a world with net zero emissions by 2050. Net zero means balancing the amount of greenhouse gases we emit with the amount that we remove from the atmosphere.

This goal gained formal traction with a Paris Agreement adopted at the 2015 UN Climate Change Conference. Even though the 2050 deadline wasn't explicitly outlined in the agreement, it quickly became the global benchmark. More than 140 nations, including the world's largest polluters, China, the U.S., India, and the European Union, have pledged to reach net zero.

Understanding fossil fuels: What are fossil fuels?

Epstein tells Michelle Makori, lead anchor and editor-in-chief at Kitco News, that it is critical to understand fossil fuels in order to grasp both their side effects and benefits.

"Fossil fuels are high-energy hydrocarbons derived from ancient life," he explains. "The significance of that is when you burn a hydrocarbon, it releases a lot of energy as the bonds break apart. When you combine the hydrogen with the oxygen, you create water vapor. And then, of course, you combine the carbon and the oxygen, and you create CO2, which is the biggest concern people have in terms of our impact on climate."

Epstein explained that the world's goal should be achieving a more livable climate, and that is not what net zero is about.

"If you really wanted a more livable climate and thought about it for two seconds, you'd realize we've made it far more livable already. Are we safer from climate now than 100 years ago? … Obviously we're safer now. The key to climate livability is not impacting the climate. The key is mastering the climate."

According to Epstein, climate livability, energy abundance and human flourishing should be the goal. He argues the world got "duped" into the net zero argument. Watch the video above for details.

"The idea that we should strive to have no impact on climate. The idea that we should strive to have no impact on anything is an anti-human idea. I reject this idea that we are some uniquely evil species whose impact we should hate," Epstein highlighted.

The real cost of net zero

Fossil fuels are essential for human flourishing as well as economic and technological progress, especially at a time when the world is facing an energy crisis, noted Epstein. His message comes at a time when North American Electric Reliability Corporation (NERC) is warning that much of North America may face electricity shortages starting in 2024, with more than 300 million people at risk of electricity shortages this year.

Epstein pointed out that the world is not in the middle of a successful transition to renewable energy, as many believe.

"We're in an energy addition at most. People deny this. They pretend solar and wind are rapidly replacing fossil fuels. It's just it's just not happening. We're using more fossil fuels than ever every year, despite the fact that getting rid of fossil fuels via net zero is literally the number one political goal in the world."

Watch the video above for Epstein's take on why fossil fuels are uniquely cost-effective and scalable.

There has been no technological developments significant enough to replace the the attributes that have made fossil fuels vital in the past, Epstein noted.

"Nothing fundamentally has changed to make fossil fuels less necessary. Particularly because most of the world still has very little energy," he added. "We're already seeing a global energy crisis and blackouts in the United States, the degradation of our grid, and we haven't even moved in the direction of net zero. All we've done is slow the growth of fossil fuels globally, and we've created all these problems. We haven't even reduced fossil fuels globally yet. They want to get rid of them in 26 years. So it's just an act of global homicide."
 

For consequences, if this net zero goal continues to be pushed forward, watch the video above.

There is a path to finding a form of energy better than fossil fuels, but humanity won't get there via bans.

"You don't get that by banning fossil fuels and making everyone poor and die early. You get that by having a world of innovation and capitalism where fossil fuels ultimately pave the way for something superior. It's a gradual process, but it's a process we should welcome. But you don't welcome it by destroying the fossil fuels that make it possible," Epstein noted.

Bitcoin as energy money

Epstein pointed out that the concept of fossil fuels as the combination of natural storage, natural concentration, and natural abundance, harnessed ultra-cost effectively by generations of economic innovation and achievement, can be applied to gold and Bitcoin.

"What we've seen with the government's monopoly on money – the purchasing power gets totally diluted. Money is used to manipulate the economy in all sorts of ways, favoring different sectors over other sectors and favoring certain people over other people. You create enormous amounts of corruption. You create the long-term problems with deficit spending," he said.

As with energy, the world should be free to choose the best form of money, Epstein added.

"I believe in human freedom in all areas of life. And just as energy is a fundamental area of life, money is a fundamental area of life," he explained. "I've always objected to the idea that the government dictates money. People should be free to discover what the best form of money is for them. Bitcoin is a fascinating innovation."

For Epstein's description of Bitcoin as energy money, watch the video above. He also addresses the wrong type of thinking when examining Bitcoin's energy use.

Kitco Media

Anna Golubova

Time to Buy Gold and Silver

Tim Moseley

Gold Reaches New Record High Following Powell's Historic Speech

In a remarkable turn of events, gold futures have once again traded to a new record closing price of $2,533.60, following Federal Reserve Chairman Jerome Powell's pivotal speech at the Economic Symposium in Jackson Hole, Wyoming. The speech, which signaled a shift in monetary policy, has sent ripples through various financial sectors, including precious metals and U.S. equities.

Chairman Powell's declaration that "the time has come for policy to adjust" marks a significant turning point in the Federal Reserve's approach. He noted that inflation has contracted closer to the Fed's 2% target while expressing concern over the labor market's well-being.

Powell emphasized that current “labor market conditions are less tight than pre-pandemic levels in 2019, a year when inflation ran below 2%”. He further stated that it seems unlikely the labor market will be a source of elevated inflationary pressures in the near future, adding that he does not seek or welcome further cooling in labor market conditions.

The financial world has interpreted Powell's remarks as a clear indication that the Federal Reserve is prepared to begin a series of interest rate cuts. While no specific timeline was provided, market expectations are high for a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 18-19. The CME's FedWatch tool currently indicates a 71.5% probability of a 25-basis point cut and a 28.5% chance of a more aggressive 50-basis point reduction.

In response to these developments, gold futures continued its ascent, with the most active December contract reaching an intraday high of $2,561.20. By late afternoon, it had settled at $2,553.60, representing a modest gain of $4.90. This upward movement occurred despite a slight strengthening of the U.S. dollar, which gained 0.20% to reach 100.87 on the dollar index.
 

The dollar's performance is worth noting, as it experienced a sharp -0.83% decline on Friday, resulting in a -1.69%weekly decline. This took the dollar index its lowest value this year. Technical analysis suggests that the dollar could find support just below the 100 level on the index, based on lows observed in July 2023.

Today's continued strength in gold prices demonstrates that while the market had anticipated dovish comments from Chairman Powell and had partially priced in a September rate cut, the full impact of these expectations had not been fully realized. This is evidenced by the moderate price advance witnessed today.

The gold market's reaction to Powell's speech and the subsequent anticipation of policy shifts underscores the intricate relationship between monetary policy, economic indicators, and precious metal valuations. As investors and analysts digest the implications of the Fed's potential move towards monetary easing, gold's role as a safe-haven asset and hedge against economic uncertainty appears to be reinforced.

As we approach the September FOMC meeting, all eyes will be on the Federal Reserve's decision and any further guidance provided regarding the pace and extent of future rate cuts. The coming weeks promise to be a critical period for gold prices and the broader financial markets as they adjust to the evolving economic landscape and the major pivot that was announced by Powell regarding the monetary policy of the Federal Reserve.

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley