Gold price down after much stronger US jobs growth in Sept

Gold price down after much stronger U.S. jobs growth in Sept.

Gold prices are modestly lower in the immediate aftermath of a U.S. employment report for September that showed much-stronger-than-expected non-farm payrolls jobs gains that suggest the Federal Reserve will maintain its hawkish stance on U.S. monetary policy. December gold hit a 10-month low and was last down $5.40 at $1,825.90 and December silver was up $0.006 at $21.00.

Friday morning's September U.S. employment situation report from the Labor Department showed the key non-farm payrolls number come in at up 336,000, which is way above expectations for a rise of 170,000 and compares to the August report showing a gain of 187,000 non-farm jobs. However, some of the internals of the jobs report were a bit weaker, such as the overall unemployment rate staying at 3.8% versus expectations of a 3.7% reading. Wednesday's big downside miss in the ADP jobs report had many thinking the jobs report Friday morning would also be a miss to the downside. Not the case. The new marketplace narrative of the Federal Reserve's interest rate policy that is "much higher for much longer" appears to be still intact.

Asian and European stocks were mixed but mostly higher overnight. U.S. stock indexes are pointed to lower openings when the New York day session begins, following the stronger jobs report. The U.S. stock indexes were firmer overnight.

  Bond yields can't keep gold down forever as ING sees higher prices in 2024

The key outside markets today see the U.S. dollar index solidly higher after the jobs report and after being slightly down overnight. Nymex crude oil prices are weaker and trading around $81.50 a barrel. Just last week Nymex crude prices poked just above $95.00 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.84% and is up more after the jobs report.

Other U.S. economic data due for release Friday includes the consumer credit report.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in an accelerating four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at the overnight high of $1,848.80 and then at $1,850.00. First support is seen at $1,815.00 and then at $1,800.00. Wyckoff's Market Rating: 1.0

The silver bears have the solid overall near-term technical advantage. Prices are trending lower on the daily bar chart. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at Tuesday's high of $21.595 and then at $22.00. Next support is seen at this week's low of $20.85 and then at $20.50. Wyckoff's Market Rating: 2.0.

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Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Gold silver see mild pressure ahead of US jobs data Friday

Gold, silver see mild pressure ahead of U.S. jobs data Friday

Gold and silver prices are modestly weaker in midday U.S. trading Thursday. The precious metals traders are tentative ahead of Friday's important U.S. employment report. December gold was last down $3.50 at $1,831.10 and December silver was down $0.201 at $20.945.

Traders are looking ahead to Friday morning's September employment situation report from the Labor Department. The key non-farm payrolls number is expected to come in at up 170,000 compared to a rise of 187,000 in the September report. Wednesday's big downside miss in the ADP jobs report has many now thinking the more important jobs report Friday will also be a miss to the downside. A weakening U.S. economy would actually be a good thing of sorts for the marketplace, in that it would likely cool the ascent in bond yields.

Asian and European stocks were mixed overnight. U.S. stock indexes are lower at midday. Risk aversion is still present late this week. The recent rise in U.S. Treasury yields and other interest rates have soured the global economic outlook, evidenced by the big drop in crude oil prices this week. Reads a Barrons headline today: "8% mortgage rates are on the horizon—and may stick around."

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`The key outside markets today see the U.S. dollar index down after hitting a 10-month high Tuesday. Nymex crude oil prices are lower again and trading around $83.00 a barrel. Just last week Nymex crude prices poked just above $95.00 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.712%.

Technically, December gold futures prices hit another 10-month low today. Bears have the solid overall near-term technical advantage. An accelerating five-month-old price downtrend is in place on the daily bar chart. However, the market is still well short-term oversold and due for a decent corrective bounce very soon. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at today's high of $1,843.50 and then at $1,850.00. First support is seen at today's low of $1,826.20 and then at $1,815.00. Wyckoff's Market Rating: 1.0.

December silver futures prices were poised to close at a 6.5-month low close today. The silver bears have the solid overall near-term technical advantage. A nine-week-old downtrend is in place on the daily bar chart. However, the market is short-term oversold and due for a corrective bounce very soon. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the March low of $20.615. First resistance is seen at today's high of $21.455 and then at $22.00. Next support is seen at this week's low of $20.85 and then at $20.50. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 285 points at 356.05 cents today. Prices closed nearer the session low and closed at a 10-month low close today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, two-month-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at last week's high of 378.60 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at today's high of 360.30 cents and then at Tuesday's high of 364.80 cents. First support is seen at this week's low of 354.90 cents and then at 350.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Contact jwyckoff@kitco.com

www.kitco.com

Time to Buy Gold and Silver

Tim Moseley

Gold silver down even as USDX bond yields see corrective pullbacks

Gold, silver down even as USDX, bond yields see corrective pullbacks

Gold and silver prices are modestly lower in midday U.S. trading Wednesday and not far above this week's multi-month lows. Technical selling is featured amid fully bearish near-term charts. Downside corrections in the U.S. dollar index and in U.S. Treasury yields today did not help out the precious metals bulls. December gold was last down $3.00 at $1,838.30 and December silver was down $0.242 at $21.14.

Today's big downside miss for the ADP National Employment Report—at up 89,000 jobs versus the consensus forecast of up 160,000—gave the bond market bulls some hope Friday morning's more important U.S. jobs report shows a cooling U.S. economy. Traders are indeed starting to look ahead to Friday's September employment situation report from the Labor Department. The key non-farm payrolls number is expected to come in at up 170,000 compared to a rise of 187,000 in the September report.

Risk appetite is not keen at mid-week, following the ouster of the U.S. Speaker of the House of Representatives Tuesday afternoon. The AP said "it was a stunning moment for Speaker Kevin McCarthy, a punishment fueled by growing grievances but sparked by his decision to work with Democrats to keep the federal government open rather than risk a shutdown. Removing the speaker launches House Republicans into chaos heading into a busy fall when Congress will need to fund the U.S. government again or risk a mid-November shutdown."

And then there's the U.S. Treasury sell off that has the marketplace spooked. A Barron's headline today reads: "The bond and stock sell off has momentum. Here's how it could end." The story goes on to say "markets have decided to pay attention to the prospect of the Federal Reserve keeping interest rates higher for longer. And now that's all they can see." The story said the ways the bond market rout can end would be if the Fed stops or reduces its bond selling. Or, "something breaks." The article added weakening U.S. economic data may be needed to help turn the tide of the higher rates narrative. "Friday's September jobs report could be the place for that to begin."

  Nervous crypto investors gain comfort via total return approach instead of only chasing price gains

Asian and European stocks were mixed overnight. U.S. stock indexes are higher at midday on corrective bounces after hitting four-month lows earlier this week.

The key outside markets today see the U.S. dollar index weaker on a corrective pullback after hitting a 10-month high Tuesday. Nymex crude oil prices are sharply lower and trading around $85.25 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.868% and has hit a 16-year high this week.

Technically, December gold futures prices were poised to close at a 10-month low close today. Bears have the solid overall near-term technical advantage. An accelerating five-month-old downtrend is in place on the daily bar chart. However, the market is well short-term oversold and due for a decent corrective bounce very soon. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,850.00 and then at this week's high of $1,864.70. First support is seen at this week's low of $1,830.90 and then at $1,825.00. Wyckoff's Market Rating: 1.0.

December silver futures prices hit another 6.5-month low today. The silver bears have the solid overall near-term technical advantage. A nine-week-old downtrend is in place on the daily bar chart. However, the market is short-term oversold and due for a corrective bounce very soon. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the March low of $20.615. First resistance is seen at today's high of $21.57 and then at $22.00. Next support is seen at today's low of $20.85 and then at $20.50. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 350 points at 358.60 cents today. Prices closed near mid-range and hit another 10-month low today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, two-month-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at last week's high of 378.60 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at Tuesday's high of 364.80 cents and then at 370.00 cents. First support is seen at today's low of 354.90 cents and then at 350.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Contact jwyckoff@kitco.com

www.kitco.com

Time to Buy Gold and Silver

Tim Moseley

Relentless rise in USDX bond yields keep stranglehold on metals bulls

Relentless rise in USDX, bond yields keep stranglehold on metals bulls

Gold and silver prices are lower again at midday Tuesday, with December gold futures hitting another 10-month low and December silver futures another 6.5-month low. A very strong U.S. dollar and rising U.S. Treasury yields that are at 16-year highs, with both showing no signs of backing down, are keeping precious metals in a tailspin. December gold was last down $7.90 at $1,839.10 and December silver was down $0.031 at $21.40.

The metals market bears are pouncing on the “higher for longer” U.S. interest rate scenario. The benchmark 10-year Treasury note yield is at its highest level since 2007. A Barron’s headline today reads: “The bond sell off is gathering pace. Why the Fed isn’t intervening.” The story suggests the Federal Reserve is content with rising Treasury yields as it helps in the inflation battle the central bank is presently waging.

U.S. stock indexes are solidly lower and are at or near their for-the-move lows, on worries about rising interest rates choking economic growth. The sell off in the stock market is likely limiting losses in the gold and silver markets, as it appears some safe-haven demand is surfacing.

  The Fed to hike rates again in November, rate cuts coming only in 2025, here's why – Pat LaVecchia

The key outside markets today see the U.S. dollar index higher and hitting another 10-month high. Nymex crude oil prices are higher and trading around $90.00 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.754% and hit a 16-year high.

Technically, December gold futures prices hit another 10-month low today. Bears have the solid overall near-term technical advantage. An accelerating five-month-old downtrend is in place on the daily bar chart. However, the market is well short-term oversold and due for a decent corrective bounce very soon. Bulls’ next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,850.00 and then at this week’s high of $1,864.70. First support is seen at today’s low of $1,830.90 and then at $1,825.00. Wyckoff's Market Rating: 1.0.

December silver futures prices hit another 6.5-month low today. The silver bears have the solid overall near-term technical advantage. A nine-week-old downtrend is in place on the daily bar chart. However, the market is short-term oversold and due for a corrective bounce very soon. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the March low of $20.615. First resistance is seen at today’s high of $21.595 and then at $22.00. Next support is seen at $21.00 and then at today’s low of $20.87. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 225 points at 361.90 cents today. Prices closed near mid-range and hit a 10-month low today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, two-month-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at last week’s high of 378.60 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at today’s high of 364.80 cents and then at 370.00 cents. First support is seen at today’s low of 358.15 cents and then at 355.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Central Banks Concerns About Rising Crypto Adoption Report Paradoxically Depicts Bullish Outcome For Crypto

Central Banks Concerns About Rising Crypto Adoption. Report Paradoxically Depicts Bullish Outcome For Crypto

Crypto adoption is on the rise, and it may well be argued that the central banks don't like that fact. Recently, the BIS, monikered as the so-called ‘Bank for Central Banks,’ published a report claiming that crypto adoption causes financial instability in developing countries, where adoption is happening the most. 

Central banks of the United States, Mexico, Brazil, and other major Latin American countries conducted the report. Their concerns about crypto adoption paint a surprisingly bullish picture. This article provides an overview of this report, explains the significance of what's being said, and tells you what it could mean for the crypto market.

The report summarized here is titled “Financial Stability Risks from Crypto Assets in Emerging Market Economies.” It was published by the Bank for International Settlements (BIS) in August 2023. The report begins with a foreword that analyzes crypto adoption in developing countries. It includes recommendations on how to keep crypto under control. 


Source: Cointelegraph

BIS member central banks of Argentina, Brazil, Canada, Chile, Colombia, Mexico, Peru, and the United States wrote the report. The representatives set up a task force led by the BIS Americas Office as the secretariat. It seems to claim that crypto adoption in developing countries is high because these countries generally have low financial literacy. This starkly contrasts with a recent study by a U.S. university, which found that crypto adoption actually increases financial literacy. This makes sense, considering that you must understand crypto before adopting it. 

About The Report

The report's first section provides a summary of the key findings. The authors are hyper-focused on the rise and fall of the crypto market. They don't seem to care about why people are adopting crypto but simultaneously acknowledge the reasons why. For example, As quoted, “Proponents of crypto assets claim that they offer lower transaction costs, faster payments, no intermediation, anonymity, and potentially high returns on investment. Whether they deliver on these claims is another matter.” 

The second part is surprising, as they refuse to argue against it. Moreover, it states, “For some users, crypto assets provide an alternative to limited investments and savings instruments, while for others, they offer a seemingly safe haven against volatile domestic currencies.” 

Now, this conflicts with what the authors implied in the forward. They know those adopting crypto are informed. In other words, they know exactly why people in developing countries embrace crypto; because their fiat currencies suck. Instead of addressing these shortcomings, the authors essentially conclude that something must be done to keep crypto under control because of supposed financial stability risks. 

The authors then highlight several risks, in particular, market risks due to volatility, liquidity risks due to a lack of transparency, credit risks due to a lack of governance, AKA control, operational risks due to cyberattacks, currency substitution risks, and capital flow risks, due to crypto’s use in cross-border payments. 

The irony is that many assets are more volatile than crypto. The existing financial system is even less transparent than the crypto industry, traditional finance (TradFi) has exponentially more credit risk than decentralized finance (DeFi), and cryptos are more resilient to cyber-attacks because they're more exposed; they are literally tested every day. This underscores the fact that the only risks the authors are concerned about are currency substitution and capital flows. 

To address these risks, they claim that “Authorities can consider selective bans, containment, and regulation,” a classic starting point for these BIS reports. For those interested, here is a summary of another crazy BIS report from last year.

The report begins with an introduction where the authors explain cryptos and how they work. They then divide crypto into two categories for their analysis: stablecoins and unbacked crypto assets, which means everything else: Bitcoin, Ethereum, et al. For context, central banks hate stablecoins, probably because they’re direct competitors to Central Bank Digital Currencies (CBDCs). Interestingly, governments seem to like stablecoins because they're backed by government debt. This means they can use stablecoins to subsidize their spending. 

The authors explain that this report builds on recent work by the Financial Stability Board (FSB), a subsidiary of the BIS. Notably, the FSB’s crypto recommendations become regulations in its member countries, namely the G20. The work the BIS is building on is a crypto framework put together by the FSB, which can be seen in the image below. This infographic is ironic because it notes that stability risks only flow from crypto to TradFi. As we've seen with the banking crisis, the stability risks come from TradFi, not crypto.


Source: BIS Papers: Financial stability risks from crypto assets in emerging market economies.pdf

Before breaking down the alleged risks crypto poses to TradFi, the authors make another eye-opening claim, 

“The crypto universe was built on the promise of an efficient, decentralized, low-cost, inclusive, safe and open monetary system, but structural vulnerabilities in the design and operation of crypto asset markets make them unsuitable as the basis for a monetary system.” 

The key word here is ‘monetary’; the central banks oversee the monetary side of the financial system. In practical terms, this means raising or lowering interest rates through various mechanisms to affect the amount of currency in circulation. It's clear that they do not want to lose control of this ability. 

The Alleged Risks

Market Risk
As stated above, the first crypto risk is market risk. Firstly, the authors implied that publicly traded crypto companies are inherently risky. They also take issue with the fact that some cryptos are held mainly by a handful of wallets. They provide some fascinating statistics to back up their claims, 

“In 2020, an estimated 10,000 individuals owned about a quarter of all outstanding Bitcoin. Satoshi Nakamoto, the anonymous creator of Bitcoin, is the largest holder, with more than 1 million stored in different wallets (around 5% of the total). Other tokens show similar concentration. For example, fewer than 100 participants control over 51% of the value in Dogecoin, ZCash, and Ethereum Classic.”

So, at first glance, these statistics are concerning, but it's easy to forget that there's even more extreme wealth concentration in other asset classes. It exemplifies the top 1% reportedly earned more than the rest of the world combined over the last two years. Why isn't the BIS raising this point? 

The second thing worth noting is that most of the authors' concerns around market stability are directed at stablecoins, which should come as no surprise, given that they are competitors to CBDCs, as mentioned earlier. 


Source: Bitcoin Treasuries 

What is surprising is that the authors also target spot Bitcoin ETFs, quoting, “Bitcoin ETFs could potentially pose a market risk in emerging market economies (EMEs) by lowering the barriers to entry for less sophisticated investors and increasing investors' direct and indirect exposure to crypto assets.” 

Oddly enough, the authors are concerned about the wealth concentration Bitcoin ETFs could cause. Here are a few more statistics; “As of end-March 2023, ETFs owned a combined 819,125 BTC, 3.9% of the total bitcoins to be issued (21 million). The largest Bitcoin ETF is Grayscale Bitcoin Trust (GBTC), which owns 643,572 BTC, or nearly 3% of the total supply. In total, ETFs, governments, and public and private companies own more than 1.6 million BTC, approximately 7.8% of the total supply.”


Source: Bitcoin Treasuries 

Liquidity risk
The second crypto risk is liquidity risk. The authors note that most of crypto’s trading volume occurs on offshore exchanges such as Binance. What's odd is that they include Huobi Global as one of the top crypto exchanges and a potential point of concern when it's no longer that large.

 


Source: Coinmarketcap.com

Oddities aside, the authors also aim for Tether and allege that its USDT stablecoin is still insufficiently backed. They missed the memo that USDT is now backed almost entirely by US Government debt, like all the other major stablecoins. It appears that the BIS is making arguments using outdated data. 

Anyhow, there’s something else that the authors point out, which is quite essential: money market funds were a significant source of market instability in 2008 and 2020. For those unfamiliar, money market funds are kind of like TradFi stablecoins. The difference is that you earn a yield on them. 

Naturally, the authors note that stablecoins are similar and that if they were to experience a run, this could create problems for the assets that back these stablecoins, namely government debt. The thing is that most money market funds are significantly more extensive than most stablecoins and, therefore, riskier. 

Credit Risk
In any case, the third is credit risk. The authors define credit risk in the context of crypto as “The potential that a counterparty in crypto-asset markets or directly exposed to crypto assets could fail to meet its obligations in accordance with agreed terms.”

Areas of concern include interconnectedness between crypto companies, citing FTX and Alameda Research. Also, lack of governance and disclosures, quoting DAOs and leverage, citing DeFi. They also included crypto exchanges having access to bank accounts, citing Chilean authorities, who forced banks to bank crypto exchanges. 

Despite favorable crypto regulations, crypto companies and projects in pro-crypto jurisdictions still have difficulty opening bank accounts. This is likely due to the Financial Action Task Force (FATF), but this pressure could be from the central banks.

Operational Risk
Regardless, the fourth crypto risk is operational risk. The authors take issue with the fact that cryptos use blockchains, quoting, “One of the key features of blockchain technology is its irreversibility. Once a transaction is recorded on the blockchain, it cannot be undone. This feature can be problematic in situations where transactions need to be reversed, such as in the case of a hack or fraud.” 

News flash: If crypto transactions could be reversed, then there would be no point in having crypto because governments, central banks, and Wall Street could manipulate it. Just like they do with money and other assets. In case it wasn't clear enough, they want to be able to do this with crypto, too. 

Disintermediation Risk
The fifth crypto risk is bank disintermediation risk. This includes both currency substitution and reserve currency substitution, which are significant concerns for the central banks. The authors admit that crypto could “..reduce the monetary authority’s control over liquidity in the economy, thus weakening the effectiveness of monetary policy…” 

The authors reiterate why people would substitute their fiat currencies with crypto. These reasons included not trusting the fiat currency, crypto being more efficient than fiat, and crypto being more private than fiat, which isn't accurate, at least in the case of cash. 

The reserve currency substitution section is where things get seriously bullish for crypto. They quote, “…if crypto assets become mainstream, they could also replace the global reserve currency as a perceived store of value…” The report denotes this substitution process as cryptoization 2.0. Put simply, the authors speculate that crypto could compete with reserve currencies, like the US dollar, if they see enough adoption.

The caveat is that they're saying this in the context of developing countries, where they think crypto will be used to evade capital controls. Even so, this pertains to something speculated about in a previous article about the BRICS countries.  It’s possible they could adopt a cryptocurrency as their common currency. The fact that BRICS’s current and future members fit the profile of the countries described in this BIS report underscores this possibility. 

Capital Flow Risk
The final crypto risk is capital flow risk, another big concern for the central banks. That's because crypto allows people to move their money around without asking for permission from Big Brother; that's not allowed in the modern financial system. The report’s authors are frustrated about the fact, quoting, 

“Crypto assets can operate offshore and hence beyond regulatory oversight. Crypto assets can be traded and stored on a global network of computers, often offshore servers and digital wallets, making it possible for them to operate beyond the jurisdiction of any one country.”

They're also upset that, quote, “…a person can create a digital wallet on a computer or mobile device and store crypto assets in it, without having to go through any formal registration process or identity verification.” Note that they want to connect all crypto wallets to digital IDs eventually. 

To drive the point home about crypto capital flows being a risk, the authors provide another statistic, saying: “One of the biggest Mexican crypto exchanges claimed that in the first half of 2022, it processed remittances for $1 billion in crypto assets, approximately 3.6% of the total flow in that period.” This is bullish for crypto.

Crypto Risk Connection To TradFi

This begs the question of how these crypto risks could spill into the traditional financial system. The third part of the report has all the answers from the perspective of the BIS. These are summarized in a single infographic (below) that shows the connection between crypto and TradFi. These include crypto to fiat, on and off ramps, stablecoins backed by government debt, etc. 


Source: BIS Papers: Financial stability risks from crypto assets in emerging market economies.pdf

What's crazy is that the authors suggest that even if crypto risks don't spill over into TradFi directly, they could spill over indirectly. The report states, 

“Disruptions in the cryptoasset market can potentially spill over to other financial markets through confidence effects. For example, a sharp drop in the value of crypto assets could erode investor risk appetite. This could lead to outflows from the traditional financial system and tighten financial conditions.”

Put differently, if the crypto markets crash, this could spook investors in TradFi, and that would cause issues; therefore, crypto must be regulated, contained, banned, etc.; it’s madness. It also makes no sense because the opposite is true; stocks influence crypto’s price action, not vice versa. 

Crypto Adoption In Developing Countries

All of these allegations about crypto risks could be intended to prime the reader for the fourth section, which is crypto adoption in developing countries. After all, if they believe crypto is so risky and harmful, they will need to ensure those unfortunate folks in the global South are extra protected. Quips aside, the authors detail four so-called risk catalysts for developing countries regarding crypto. 

  1. Crypto adoption
  2. Inflation and a lack of central bank credibility
  3. Lack of payment infrastructure and financial literacy (Arguably not true)
  4. A lack of crypto regulation (or rather, the lack of anti-crypto regulation that central banks want to see)

Recommendations For Controlling Crypto

Following a lengthy overview of all the crypto regulations in select North and South American countries, the authors provide recommendations about controlling crypto in the fifth part of the report. They start by saying that there are three approaches to managing crypto: bans, containment, and regulation. 

They say that many authorities have argued that crypto should not be regulated because regulations would give the industry a seal of approval that could lead to more adoption. Regulations mean institutions and institutions represent lobbying for better regulations. Believe it or not, the authors aren't in favor of a crypto ban because it would mean no oversight of crypto. They also do not favor containment, i.e., keeping crypto separate from the financial system, because they know secret connections would inevitably manifest. 

So, the one option remaining is to regulate crypto, specifically with the same risk and regulation principle. If you've read this article about crypto regulations, you'll know that this principle could turn crypto into another arm of the existing financial system, which would defeat its purpose. One of the entities pushing this principle the hardest has been the World Economic Forum (WEF), which the authors cite many times in this report. 

For developing countries specifically, the authors recommend they get their monetary business in order so that there's no incentive for crypto adoption. Indeed, if the central banks and governments manage their currencies properly, crypto probably wouldn't exist because it wouldn't need to exist. They only have themselves to blame at the end of the day, and with a bit of luck, crypto will force them to be somewhat more responsible going forward. 

What Does It Mean For Crypto?

What does all of this mean for the crypto market? In short, it's very bullish. The central banks are aware that crypto adoption is growing fast and is ultimately due to deficiencies in the existing financial system, which they know they probably can't fix. These deficiencies are especially acute in developing countries, and for good reason. 

The US dollar is the world's reserve currency, and it's used in up to 96% of international trade in some regions. Unless a country has many resources, it has difficulty getting its hands on US dollars. These countries can only get US dollars by requesting an IMF or World Bank loan. These loans come with many conditions, which are typically in favor of the US and US-based corporations. 

Now, the consequence of this is that these indebted developing countries just can't get ahead. As pointed out by macro analyst Lyn Alden, only a handful of developing countries have managed to become developed over the last 50 years. For the ones that manage, it was due to their natural resources, especially oil. Some of the only exceptions are South Korea and Taiwan,  both of which have received significant support from the US over the decades, probably for geo-political purposes. 

The rest of the developing world has been stuck in the same place, sometimes worse, and they're starting to understand why. Consider that even the BIS referred to "The global reserve currency in their cryptoization 2.0 prediction.” The keyword is ‘The’一it's singular. Logically, it's a reference to the US Dollar.  Assuming it is and probably is, the BIS’s cryptoization quote reads: "If cryptocurrencies achieve mainstream adoption, they could replace the US dollar as the world's reserve currency.” 

Now consider that this is something that many central banks could be interested in; remember that the BRICS are a thing. This would explain the somewhat paradoxical conclusions of the BIS report, which is to regulate crypto even though they know that it will inevitably result in more crypto adoption. 

When you combine this conclusion with the fact that the BIS will allow central banks to hold up to 2% of their balance sheets in crypto starting in 2025, you begin to realize that some central banks might be breaking ranks. In fact, it's possible they're all breaking ranks except the Federal Reserve. That would be truly something, wouldn't it? 

 

 

 

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

Gold bulls can look forward to a bright future despite headwinds – Heraeus

Gold bulls can look forward to a bright future despite headwinds – Heraeus

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Even as markets watch gold prices fall into the low 1830s as the fourth quarter gets underway, interest rate history favors gold bugs in the medium and long term, according to the latest precious metals report from Heraeus.

“The gold price tends to rise following the first cut of US interest rate cycles,” the analysts write. “On average since 1984, one calendar year after the Federal Reserve first cuts its rate after a hiking cycle, gold is 10% higher than the day of the decision to reduce interest rates, and after two years is 18% higher. The dollar tends to weaken, yields on U.S. Treasuries fall, and the economy tends to have deteriorated. All of these elements can act as a tailwind for the gold price.”

The analysts say that after the yield on the 10-year treasury note peaks, it’s only a matter of time before Fed Chair Jerome Powell begins to cut. “The last rate hike of the cycle also tends to coincide with the peak in the yield on 10-year U.S. Treasuries,” they write. “Since 1984, interest rate cuts have never lagged the peak in 10-year U.S. Treasury notes by more than one year and seven months – this being the outlier in 1989. Excluding 1989, cuts have followed the peak by an average of ~10 months.”

They note, however, that this does not constitute a guarantee. “Two years after the first interest rate reduction in 1995, gold was 16% lower at $325.50/oz,” they say. “On the other hand, gold’s relative performance to the upside following interest rate cuts has grown since the 2001 cycle.”

U.S. government bond yields are now at the highest rate in 16 years, hitting a fresh high of 4.7% just after noon EDT on Monday. “The yield on longdated US Government debt has not hit 4.5% since September 2007, the month that interest rates were lowered 50 bp from 5.25% to 4.75% and the US was on the brink of recession,” note the Heraeus analysts. “This suggests the higher-for-longer message from the Fed may now be sinking in for investors, and raises the expectation that for this cycle there could be a more prolonged period before interest rates begin to fall.”

They acknowledge that gold’s short-term outlook is challenged by the surge in yields. “The average rate tightening cycle has lasted for 21 months with a total Federal Funds increase of 3.02%, but this point is clearly past,” the analysts write. “Historically, long-term yields peak shortly before the Fed stops increasing short-term rates. Inflation may continue to climb well after the Fed curtails rate hikes. The uptick in consumer prices in August highlights that despite a Fed pause in September, inflation may not be tamed just yet, and that gold is likely to face headwinds until at least the new year or until yields flag.”

Another key headwind for the yellow metal is the strength of the U.S. dollar, which continues to outperform, with DXY flirting with 107 on Monday afternoon, a level it has not breached since Nov. 22. “The strength in the U.S. dollar in the last week may be a sign that traders are beginning to accept that interest rates may be higher for longer,” they write, noting that the dollar index “is up ~7% since mid-July, against other major currencies.”

The Heraeus analysts believe the next significant technical support for gold is all the way down at $1,800 per ounce, a price the precious metal has not seen since the days before Christmas last year.

By

Ernest Hoffman

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Analysts expect gold to kick off Q4 with gains while retail investors are evenly split

Analysts expect gold to kick off Q4 with gains, while retail investors are evenly split

Gold prices underwent a dramatic selloff this week, continuing and accelerating the downtrend that began after the Federal Reserve left interest rates unchanged on the 20th and reiterated that rates would remain higher for longer than previously anticipated.

The latest Kitco News Weekly Gold Survey sees most market analysts optimistic that gold will see a bounce in the near term, while retail investors are more evenly divided after experiencing seven straight sessions of losses.

Everett Millman, Chief Market Analyst at Gainesville Coins, attributed gold's recent slide largely to seasonal factors and options contracts expiring, and sees the precious metal rebounding to start the fourth quarter.

"My initial reaction to the downturn this week was that it had a lot to do with the options expiry on Comex, which does usually lead to a lot of downside volatility as people are closing out or rolling over contracts," he said. "But given that this price action continued throughout the rest of the week, I'm also going to attribute that a bit to seasonality. The gold market usually goes into a slumber in the late summer, early autumn months. We saw that exact same pattern last year. Unless markets are interpreting the FOMC to be extremely hawkish, which I don't think is what's going on, I think you have to chalk it up to seasonality and just the regular trading dynamics that come at this time of year."

"Usually October, the beginning of the fourth quarter, is when you see the tide turn the opposite direction," Millman said. "It's when we get a lot of gold buying events out East, in both India and China. India has the Diwali festival coming up in early November, a lot of buyers over there start accumulating gold in the weeks preceding that."

"I would expect to see gold, if not at the beginning of October, certainly by the beginning of November, to see prices on the rise again."

James Stanley, senior market strategist at Forex.com, believes gold could fall further in the first week of October. "The rates theme has markets on edge and gold's behavior since FOMC has been aggressively bearish with both spot and futures taking out a number of supports along the way," Stanley said. "There's no evidence that's finished yet."

This week, 13 Wall Street analysts participated in the Kitco News Gold Survey. Seven experts, or 54%, expected to see higher gold prices next week, while four analysts, or 31%, predicted a drop in price. Only two analysts, or 15%, were neutral on gold for the coming week.

Meanwhile, 540 votes were cast in online polls. Of these, 245 retail investors, or 45%, looked for gold to rise next week. Another 219, or 41%, expected it would be lower, while 76 respondents, or 14%, were neutral about the near-term prospects for the precious metal.

Kitco Gold Survey

Wall Street

Bullish54%

Bearish31%

Neutral15%

VS

Main Street

Bullish45%

Bearish41%

Neutral14%

The latest survey shows that retail investors expect gold to trade around $1,872 per ounce next week, which is $64 below last week's prediction, but which would still represent a gain of $23 from the current spot price.

The coming week will see the release of the ISM Manufacturing and Services PMIs for September along with over a dozen speeches by U.S. and European central bankers, including Fed chair Jerome Powell and ECB president Christine Lagarde. The highlight of the week will be the Nonfarm Payrolls report for September, which is slated for release on Friday morning, but which could be canceled if the U.S. government shuts down.

Mark Leibovit, publisher of the VR Metals/Resource Letter, sees gold prices rising next week as the greenback pulls back. "Bullish, as it appears the U.S. dollar may be forming a trading top," he said.

Darin Newsom, Senior Market Analyst at Barchart.com, shared a technical case in favor of gold gaining ground next week.

"While the long-term trend and intermediate-term trends remain down, Dec gold's short-term daily chart is showing the contract to be sharply oversold," Newsom said. "Daily stochastics established a bullish crossover below 20% at Thursday's close, a signal the short-term trend is set to turn up. It's possible, maybe not probable, Dec23 completes a bullish 2-day reversal Friday. To do so, it would need to rally and close near the daily high. If that doesn't happen, a bullish reversal pattern will be delayed for a bit."

Marc Chandler, Managing Director at Bannockburn Global Forex, also sees upside potential for gold as the fourth quarter gets underway. "I look for gold to bottom shortly," Chandler said. "Soft US core inflation helping US rates stabilize and the dollar's pullback should help the yellow metal. Month-end and quarter-end flows may be distorting the immediate picture, but the headwinds on the US economy look set to intensify: tightening of credit, the cumulative effect of rising rates, deposits still leaving banks, the resumption of student debt servicing, the likely partial closure of the US federal government, and the high energy price may sap the strength of the US economy."

Looking at the technical picture, Chandler said, "I would be inclined to buy gold on further weakness and look for a move to $1885 to stabilize the technical tone and a move $1892 to boost confidence a low is in place."

"Funds are still holding a net-long futures position, not changing it much over the course of September," Newsom noted, "so with the end of the quarter in sight, it could lead to some long-liquidation."

Adam Button, Chief Currency Analyst at Forexlive.com, still believes bonds and the U.S. dollar will dictate the precious metal's trajectory in the near term, but he sees a silver lining to gold's recent weakness.

"There's a wonderful seasonal gold trade that kicks off in November, and this is setting up very nicely for a test of $1800, and then strength November through January," Button said. "Obviously the bonds are the catalyst here. Right now, you can buy a three-month T-bill, five and a half percent, 10-years, four and a half percent, and gold still yielding zero. The yield difference between gold and other traditional safe havens is painful at the moment, especially in an environment with a rising dollar."

He said gold bulls believed the Fed would be signaling an end to rate hikes by this point. "Instead, there was talk this week about extending the hiking cycle into 2024, Kashkari was a pretty big catalyst saying that, a 40 percent chance that they have to keep hiking, perhaps significantly, in 2024."

Button believes gold will need to see weakness in U.S. economic data before any kind of sustained rally. "I suspect it's coming, but we may not be getting any economic data starting next week if the shutdown happens, at least not the top tier data," he said. "That stokes some economic weakness later. But now, say the shutdown last two weeks in October, then can you really trust the October data? Because it's all going to be skewed. I don't know… I think the market will probably figure out whether it's real or fake weakness, but it might look like weakness at least, which should be bullish for gold."

Button also agreed that quarter-end factors were in play this week, and he thinks there's a decent chance gold sees a bounce early next week. The price action today isn't particularly promising, but the day's not over," he said. "I don't have a huge amount of confidence we'll get a big bounce, but I'd say I'm neutral for next week."

And Kitco Senior Analyst Jim Wyckoff sees downside risks for the precious metal. "Steady-lower. Technicals bearish," Wyckoff said. "That means the path of least resistance for prices remains sideways to lower."

Gold prices are currently down 0.84% on the day and 4% on the week, with spot gold last trading near session lows at $1,849.09 an ounce at the time of writing.

By

Ernest Hoffman

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

GOLD FIXES

GOLD FIXES

For almost 100 years, the main gold benchmark price was set by the London Gold Fix. The price was determined in a closed physical auction among bullion banks. A price is determined after most buy orders matched most sell orders.

These auctions would take place twice daily, once in the morning and once in the afternoon in London, England.

However, the London Gold Fix shut down in 2015 and the responsibility for maintaining the process fell to the LBMA, which created the LBMA Gold Price on March 2015. The association shifted the price matching mechanism from a physical auction to an open electronic auction among its members.

The benchmark is still set twice a day at 10:30 a.m. and then at 3 p.m. London time.

There are thirteen participating banks, including the Bank of China, Bank of Communications, China Construction Bank, Goldman Sachs International, HSBC Bank USA NA, ICBC Standard Bank, JP Morgan, Morgan Stanley, Société Générale, Standard Chartered, The Bank of Nova Scotia – ScotiaMocatta, The Toronto Dominion Bank and UBS.

Time to Buy Gold and Silver

Tim Moseley

Corrective price gains for gold silver on short covering

Corrective price gains for gold, silver on short covering

Gold prices are a bit firmer and silver solidly up in early U.S. trading Friday. Short covering in the futures markets is featured after December gold hit a 6.5-month low Thursday. A lower U.S. dollar index and a dip in U.S. Treasury yields today are friendly daily outside market elements for the metals markets. December gold was last up $5.60 at $1,884.20 and December silver was up $0.519 at $23.26.

Asian and European stocks were mixed to firmer overnight. U.S. stock indexes are pointed to higher openings when the New York day session begins. The stock indexes are seeing corrective rebounds from recent selling pressure. Reads a Wall Street Journal headline today: "The 2023 stock market rally sputters in new world of yield.";

Today is the last trading day of the week, of the month and of the quarter. That makes it an extra important trading day for markets, from a technical perspective.

The clock is ticking at the month of September winds down and the U.S. Congress has not come to agreement to fund the U.S. government. A shutdown looks likely this weekend. This matter still has traders and investors more risk averse.

In overnight news, the Euro zone September consumer price index came in at up 4.3%, year-on-year, compared to the August reading of up 5.2%. The August CPI was slightly below market expectations.

  Gold's selloff doesn't change the long-term bullish outlook – Saxo Bank

The key outside markets today see the U.S. dollar index lower on a downside correction after hitting a 10-month high earlier this week. Nymex crude oil prices are higher and trading around $92.50 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.549%.

U.S. economic data due for release Friday includes personal income and outlays, advance economic indicators, the ISM Chicago business survey and the University of Michigan consumer sentiment survey.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at Thursday's high of $1,896.80 and then at $1,900.00. First support is seen at the overnight low of $1,879.60 and then at this week's low of $1,874.50. Wyckoff's Market Rating: 2.0

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at this week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at the overnight high of $23.345 and then at $23.50. Next support is seen at $23.00 and then at the overnight low of $22.815. Wyckoff's Market Rating: 3.5.

If you have not done so, I encourage you to try out my new "Markets Front Burner"; email report. I think it's one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It's a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

Slight price rebounds in gold silver on short covering

Slight price rebounds in gold, silver on short covering

Gold and silver prices are just a bit firmer in early U.S. trading Thursday, after this week's solid selling pressure that drove December gold futures to a 6.5-month low Wednesday. Some tepid short covering in the futures markets is featured in both metals today. A lower U.S. dollar index today is also a friendly daily outside market element for the metals markets. December gold was last up $2.40 at $1,893.30 and December silver was up $0.081 at $22.805.

Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to narrowly mixed openings when the New York day session begins. Risk appetite remains dented as the U.S. government shutdown this weekend looms. The Associated Press reports: "As the Senate marches ahead with a bipartisan approach to prevent a government shutdown, House Speaker Kevin McCarthy is back to square one — asking his hard-right Republicans to do what they have said they would never do: approve their own temporary House measure to keep the government open." Goldman Sachs reportedly estimates the shutdown will probably last three weeks.

A Barron's headline today reads: "Forget the shutdown. Why stocks have plenty more to worry about." The story goes on to say the main reason for recent stock market declines is changing perceptions about interest rates. Now the thinking in much of the marketplace is higher for longer, maybe much longer, including potential stagflation, as pointed out by JP Morgan CEO Jamie Dimon in the press recently.

Striking union workers in the U.S., led by the United Auto Workers, are also starting to weigh more heavily on trader and investor sentiment.

  Gold could fall to $1,850 and then $1,800 after breaking below August lows

The key outside markets today see the U.S. dollar index weaker after hitting a 10-month high on Wednesday. Nymex crude oil prices are weaker and trading around $93.25 a barrel. A Dow Jones Newswires headline today reads: "Saudi Arabia and Russia win big in gamble on oil production cuts."

Meantime, the benchmark U.S. Treasury 10-year note yield is at a 16-year high this week and presently fetching 4.647%.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the third estimate of second-quarter GDP, revised corporate profits, pending home sales and the Kansas City Federal Reserve manufacturing survey.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,900.00 and then at $1,913.60. First support is seen at this week's low of $1,890.30 and then at this year's low of $1,883.80. Wyckoff's Market Rating: 2.0

]

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at this week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at Wednesday's high of $23.12 and then at $23.39. Next support is seen at this week's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0.

If you have not done so, I encourage you to try out my new "Markets Front Burner" email report. I think it's one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It's a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter .

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Time to Buy Gold and Silver

Tim Moseley

The Artist that came out of the Winter