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Gold is well supported at $2,000 but don't look for record highs before Q2 2024 - Commerzbank
The Federal Reserve's shift to a more neutral stance on interest rates will continue to support gold prices, but one international bank is warning investors that the precious metal could see some weakness in the near term.
Last week the gold market came within $4 of its all-time highs after the Federal Reserve raised interest rates by 25 basis points and signalled that it is ready to hold interest rates steady. In her latest gold update, Thu Lan Nguyen, head of commodity research at Commerzbank, said that it is unlikely the Federal Reserve will be able to raise interest rates further in the current environment. As a result, she is increasing her year-end gold price target to around $2,000 an ounce, up from the previous target of $1,950 an ounce.
In its quarterly targets, Commerzbank said that it sees gold prices holding a steady average of $2,050 an ounce in the fourth quarter of this year and the first quarter of 2024.
While the German bank is bullish on gold, Nguyen said that investors will probably have to wait until at least the second quarter of next year before gold sees a sustained break above its all-time highs.
Although the Federal Reserve may not be looking to raise interest rates anytime soon, Commerzbank said it is unlikely they will cut rates this year.
"Even though the Fed has ended its rate hike cycle somewhat earlier than we had expected, our US experts continue to regard rate cuts as unlikely this year. Fed Chairman [Jerome] Powell also rejected such expectations at the press conference following the meeting," Nguyen said in her report. "After all, inflation (based on consumer prices excluding energy and food) is still well above the Fed's target at 5.6% most recently, and it is likely to take some time before it approaches the 2% target on a sustained basis." Read More
JPMorgan says more investors looking at gold, cites hedge against 'catastrophic scenario,' banking crisis
There is rising demand for gold as banking turmoil intensifies and investors look for a hedge against a "catastrophic scenario," JPMorgan said in a note.
"The U.S. banking crisis has increased the demand for gold as a proxy for lower real rates as well as a hedge against a 'catastrophic scenario,'" JPMorgan strategists wrote.
Another 2023 favourite is the technology sector, they added.
JPMorgan described this strategy as the "long duration" trade, stating that it is growing in popularity. The trade means being overweight on gold, technology growth stocks, and shorting USD.
The "long duration" trade is now a theme in May. And it is "relatively attractive." In the case of a deep U.S. recession, its upside is exponential. And in the case of a mild U.S. recession, its downside risk is limited, the firm said. Read More
Central bank gold buying hits Q1 records, but it's significantly lower than last year's massive pace
Central banks added 228 tonnes to their global gold reserves during the first quarter of 2023, marking a record pace for the first three months of the year since data collection began in 2000, according to the World Gold Council (WGC). But the numbers can be interpreted in more than one way.
The Q1 central bank demand followed last year's record annual purchases of 1,078 tonnes.
But even though the first quarter numbers were up 176% from the same period last year, they were down 45% from Q4 2022 figures and marked a second consecutive quarter of declines. In comparison, central banks purchased 417 tonnes of gold in Q4 2022. Read More
Gold firmer amid rallying crude oil, bullish charts
Comex gold futures prices are moderately up in midday U.S. trading Monday. Silver prices are near steady. The key outside markets are friendly for the precious metals to start the trading week, as the U.S. dollar index is a bit weaker and crude oil prices are solidly higher. However, gains in the precious metals are being limited by a rise in U.S. Treasury yields today. The technical charts remain solidly bullish for gold and silver. June gold was last up $11.10 at $2,035.80 and July silver was steady at $25.93.
Global stock markets were mixed but mostly higher overnight. U.S. stock indexes are mixed at midday. There is less risk aversion in the general marketplace to start the trading week. U.S. banking stocks have recovered some of their recent losses. Banking analysts will today closely scrutinize the Federal Reserve’s first-quarter Senior Loan Officer Survey, to get a gauge on how much the banking industry has pulled back in its lending practices the past few months.
Technically, June gold futures bulls have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,085.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,980.00. First resistance is seen at $2,050.00 and then at $2,063.40. First support is seen at today’s low of $2,022.00 and then at last Friday’s low of $2,007.00. Wyckoff's Market Rating: 8.0.
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July silver futures bulls have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $27.00. The next downside price objective for the bears is closing prices below solid support at $24.00. First resistance is seen at the April high of $26.435 and then at $26.75. Next support is seen at last Friday’s low of $25.41 and then at $25.00. Wyckoff's Market Rating: 8.0. Read More
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Gold price settles above $2,020 as Yellen warns of 'constitutional crisis' if debt cap not raised
With the chance of a U.S. default in a matter of weeks, U.S. Treasury Secretary Janet Yellen warned that if the debt ceiling is not lifted, it could trigger a "constitutional crisis."
"It's Congress's job to do this. If they fail to do it, we will have an economic and financial catastrophe that will be of our own making," Yellen told ABC on Sunday. "And we should not get to the point where we need to consider whether the president can go on issuing debt. This would be a constitutional crisis."
The debt cap negotiations should not be done "with a gun to the head of the American people," Yellen added.
The latest message comes ahead of U.S. President Joe Biden's Tuesday meeting with Republican House Speaker Kevin McCarthy, Republican Senate Minority Leader Mitch McConnell and top congressional Democrats to discuss the debt issue.
"The meeting between President Biden and Republican leaders on Tuesday to discuss the U.S. debt ceiling will be closely watched. We think that political talks will go on for some time before an agreement to raise the debt ceiling is finally reached, which could weigh on risk appetite," Capital Economics commodity economists said. Read More
Buy the dip; gold prices are going to be a lot higher five years from now - Degussa's Polleit
Investors should be prepared to see higher volatility in the gold market as market expectations contrast sharply with what the Federal Reserve has signalled regarding the future path of interest rates.
However, one market analyst is recommending investors ignore the noise and focus on the broader bullish trend in the marketplace. In an interview with Kitco News, Thorsten Polleit, chief economist at Degussa, said that investors should use any gold price weakness to build a strategic long-term position.
"If you are a long-term investor and looking to hold gold for the next five years, then this price is right," he said. "Looking past the noise, gold prices are going to be a lot higher five years from now."
Polleit's comments come as the gold market holds support above $2,000 an ounce after prices dropped sharply from last week's near-record highs. June gold futures last traded at $2,029.20 an ounce, up 0.20% on the day. Read More
Janet Yellen warns of a potential “Constitutional Crisis”
Speaking on ABC’s “This Week” on Sunday U.S. Treasury Secretary Janet Yellen said that negotiations in regards to raising or suspending the debt ceiling should not take place “with a gun to the head of the American people”. During her interview, she issued a dire warning that a failure by Congress to act on the debt ceiling would trigger a “constitutional crisis” that would also call into question the federal government’s creditworthiness.
She expressed the seriousness of the financial market's consequences if the debt ceiling is not raised by early June, when she said that, “the federal government could run short of cash to pay bills”. The Treasury Secretary adamantly expressed that “it’s Congress’s job to do it, if they failed to do it, we will have an economic and financial catastrophe that will be of our own making”. Read More
Tighter credit market conditions highlighted in Fed's Senior Loan Officer Survey could support gold prices
The gold market is holding above $2,000 but struggling to attract new momentum after last week's sharp selloff following an attempted rally to record highs. However, according to some market analysts, tighter market conditions highlighted in the latest Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) could provide some support in the near term.
Some economists have noted that traditionally the quarterly Senior Loan Officer Survey is not a major report that is highly followed. However, many have been waiting for this report to gauge how badly the banking crisis has impacted the banking sector.
The sting of Monday's report was diminished slightly as Federal Reserve Chair Jerome Powell quoted the report's view of tightening credit markets in his press conference after the central bank raised interest rates by 25 basis points and shifted its monetary policy to a more neutral stance. Read More
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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.
