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Gold is insurance against a hawkish Fed policy mistake
I hope all the gold investors out there are wearing their seatbelts because if this past week is any indication, the price action is going to continue to be a bumpy ride.
Gold bulls were once again caught on the back foot as the Federal Reserve struck a hawkish tone on Wednesday, setting the stage for a rate hike in March and a reduction of its bloated balance sheet before the end of the year.
Following the central bank's monetary policy decision, Fed head Jerome Powell added to the hawkish posturing, saying that the economy and the labor market are in good positions to stand up to potential rate hikes.
"I think there's quite a bit of room to raise interest rates without threatening the labor market," Powell said during this press conference. Read More
Hawkish Fed sends gold prices down and boosts bearish sentiment
The Federal Reserve's push to raise interest rates "soon" has awakened gold bears and sent the bulls into hiding as the precious metal sees its worst selloff since mid-November.
The bearish sentiment among Wall Street analysts comes as gold prices have dropped nearly 3% this week since Wednesday's Federal Reserve monetary policy meeting, which set the stage for a rate hike in March. At the same time, Federal Reserve Chair Jerome Powell made a case for aggressive action this year to deal with the rising inflation pressure.
"There's quite a bit of room to raise interests without threatening the labor market. This is by so many measures a historically tight labor market — record levels of job openings, quits, wages are moving up at the highest pace they have in decades," Powell said.
Gold prices have dropped as markets have started to price in the potential for five rate hikes this year. However, some analysts have said that markets and the Fed are too aggressive. Read More
The Metals, Money, and Markets Weekly by Mickey Fulp - January 28, 2022
Gold's strong decline results in a high probability of a death cross forming
Gold has declined dramatically this week opening at approximately $1841 on Monday, with the February 2022 Comex contract currently fixed at $1790.10. Gold declined by three dollars today taking the weekly price decline two $50.90. If you factor in the highest value gold traded which occurred on Tuesday at $1854 to today's low it equals a $78 differential between the highest and lowest price gold traded to this week.
Most alarming on a technical basis it seems as though a pattern called a "death cross" is imminent. Currently, the 50-day moving average is fixed at $1805.70 and the 200-day moving average is fixed at $1805.50. In other words, the current spread between the short-term and long-term averages is $0.20.
Image Source: Kitco News
According to Investopedia, "The death cross is a technical chart pattern indicating the potential for a major sell-off. The death cross appears on a chart when a stock's short-term moving average crosses below its long-term moving average. Typically, the most common moving averages used in this pattern are the 50-day and 200-day moving averages." Read More
Why some investors prefer silver—bigger moves
Silver favors investors with larger prices swings relative to gold, said James Anderson, CEO of Guanajuato Silver.
On Friday Anderson recorded Kitco Roundtable with Mining Audiences Manager Michael McCrae and Kitco correspondent Paul Harris.
Guanajuato Silver (GSilver) is reactivating past-producing silver and gold mines near the city of Guanajuato, Mexico. The company currently has two mines are El Cubo, which is currently producing, and El Pinquico, which is advancing to restart.
"A lot of the investors I've spoken to often say that they make more money [investing] in silver rather than gold, because it has much greater volatility, greater beta. So when silver moves, you can really go to the moon," said Anderson.
"But obviously if you come in at the right point." Listen to the podcast
The world's top 10 largest gold mines in Q3 2021: Grasberg regained the crown
Freeport-McMoRan’s gigantic Grasberg mine in Indonesia was the world’s largest gold producing center in Q3 2021. Overall, the top 10 largest gold operations in the world produced 2,339 koz of the yellow metal in Q3 2021, an increase of 5% compared to Q3 2020.
Kitco ranked the top ten largest gold mines in the world based on the reported production figures for Q3 2021; hence, the world’s largest Muruntau gold mine in Uzbekistan was excluded from this quarterly ranking due to lack of data.
Freeport-McMoRan’s gigantic Grasberg mine in Indonesia was the largest gold operation with 371 koz of gold produced in Q3 2021, which is a significant 57% increase compared to Q3 2020, as the company successfully transitioned Grasberg to be the world’s largest underground block-caving operation.
This transition is expected to enable Grasberg to generate average annual production for the next several years of 1.55 billion pounds of copper and 1.6 million ounces of gold. Read More
Why did gold price just plunge $70?
As markets digested all of the Federal Reserve's hawkish signals, gold tumbled $70 from its two-month highs. Here's a look at Kitco's top three stories of the week: Read More
Gold and silver move lower heading into the European open
Gold (-0.24%) and silver (-0.57%) suffered a tough start to the trading week. In the rest of the commodities complex, copper (-0.50%) is also trading lower but spot WTI bucked the trend to move 0.77% higher overnight.
With Chinese markets closed for Golden Week volume was slightly lower in equities markets, The ASX (-0.24%) and Nikkei 225 (1.07%) were mixed overnight as the Australian stocks were hit by lower metals prices. Futures in Europe are pointing towards a positive open.
FX markets had a decent session. AUD/USD rose 0.73% while NZD/USD was a close second rising 0.47%. USD/JPY also pushed higher rising 0.26% overnight. In the crypto space, Bitcoin dipped again falling 1.94% to reach $37,167. Read More
Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
