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Gold Price News: Stubbornly High Inflation Pushes Gold Down Below $1,840
Gold slumped to its lowest level since early January after the latest US inflation data came in higher than expected, raising the prospect of the Federal Reserve continuing its interest rate hiking policy for a few more months still.
While inflation is clearly on a downward trend in the US, Tuesday’s figure showed the pace at which consumer prices are rising hasn’t slowed as much as the market was anticipating. With several Fed officials reiterating the need to ensure inflation is well and truly curbed before the US central bank eases off on its rate hikes, this latest data point will only serve to reinforce the bank’s commitment to implement further rate increases in the coming months.
This readjustment of how many more rate hikes the Fed is set to implement has prompted the price of gold to tumble as the prospect of interest rates rising diminishes the appeal of the precious metal, as it doesn’t generate a yield for its holders, with other interest-bearing assets favoured instead. Read More
Silver Price News: Silver at 2 ½ Month Low on Prospect of More Rate Hikes
Silver continues to slide without a clear support to cling onto with the price now down to around $21.50 an ounce, its lowest level in two and a half months.
The prospect of the Federal Reserve, and indeed other central banks around the world, continuing to increase their benchmark interest rates for longer than previously anticipated to combat stubbornly high inflation has seen silver punished for its lack of yield.
This same dynamic played out for much of 2022 when the Fed initially announced its switch to a more aggressive monetary policy, which prompted silver to endure a multi-month slump from April to September. When the market started to reassess how much longer the Fed was likely to continue hiking rates, silver was able to recover over the last quarter of 2022 before largely treading water over January. Read More
Mississippi looking to lead the fight to recognize gold and silver bullion as money
Gold and silver's path to regain their luster as sound money continues to move forward, with several states looking to approve legislation that would remove sales taxes on the precious metals.
According to a report from the Sound Money Defense League, out of eight states that still charge a sales tax on gold and silver, five: Mississippi, Maine, Kentucky, Wisconsin and New Jersey are considering bills to end this tax this year.
Mississippi, in particular, became the latest state to join the club as Sen. Melanie Sojourner introduced her proposed legislation Tuesday.
However, Mississippi's proposed law also goes a few steps further as it would also remove any gain or loss on the sale or exchange of gold and silver bullion that would be included in a taxpayer's federal adjusted gross income.
"Under current law, a taxpayer who sells precious metals may end up with a capital "gain" in terms of Federal Reserve Notes. This capital "gain" is not necessarily a real gain; it's often a nominal gain that results from the inflation created by the Federal Reserve and the attendant decline in the dollar's purchasing power," said Jp Cortez, policy director for the Sound Money Defense League in the report.
"Neutralizing Mississippi's sales and income tax treatment of the monetary metals would remove two major disincentives in Mississippi that stand against the ownership and use of the monetary metals," Cortez added. Read More
Gold, silver punished by stronger USDX, falling crude oil
Gold and silver prices are solidly lower in midday U.S. trading Wednesday. Gold hit a nine-week low and silver a 2.5-month low today. The key outside markets were in a bearish daily posture for the metals markets at mid-week, as the U.S. dollar index was sharply higher and crude oil prices were lower. April gold was last down $23.30 at $1,842.00 and March silver was down $0.333 at $21.54.
The marketplace is a bit unsettled at mid-week, following a U.S. consumer price index report on Tuesday that was just slightly above market expectations. Also, the U.S. data point of the day Wednesday saw retail sales rise a stronger-than-expected 3.0% in January from December. The report was expected to come in up 1.9%, following a decline of 1.1% in December from November. The takeaway from Tuesday’s CPI report and today’s retail sales data appears to be that the Federal Reserve has more heavy lifting to do in the coming months to slow down the U.S. economy and crimp consumer and commercial demand to get inflation down to the level the Fed desires, which is around 2% annually. The U.S. producer price index report is Thursday. This scenario is a bearish one for the metals, from a global demand perspective.
Technically, April gold futures prices hit a six-week low today. Bulls have lost their slight overall near-term technical advantage. A fledgling downtrend is in place on the daily chart. 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 today’s high of $1,870.90. First support is seen at today’s low of $1,839.30 and then at $1,830.00. Wyckoff's Market Rating: 5.0.
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March silver futures prices hit a 2.5-month low today. The silver bears have the overall near-term technical advantage and have momentum on their side. 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 $21.00. First resistance is seen at today’s high of $21.875 and then at this week’s high of $22.085. Next support is seen at today’s low of $21.385 and then at $21.00. Wyckoff's Market Rating: 4.0. Read More
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What's happening with gold price after hawkish Fed speakers, strong data
Gold is testing support at $1,850 an ounce and losing the battle. The gold market is reacting to robust economic data, which suggests more tightening by the Federal Reserve.
The highly-anticipated macro releases from this week showed that inflation is cooling slower than expected while the U.S. economy remains fairly strong. And that could justify more rate hikes by the Fed.
"The precious metal is trading below $1850 thanks to the sticky U.S. inflation print and conflicting views from Fed officials. Given how the dollar is likely to draw strength from expectations around the Fed staying hawkish for longer, this could translate into more pain for zero-yielding gold down the road," said Lukman Otunuga, senior research analyst at FXTM.
Retail sales from January rebounded sharply, rising 3% versus the expected 1.8%. Also, New York state's factory activity contracted in February for a third consecutive month, but at a much slower pace.
This comes after U.S. inflation data showed annual CPI at 6.4% in January versus the expected slowdown to 6.2%.
"While inflation in the world's largest economy continues to slow, it's not falling as quickly as investors anticipated – ultimately rekindling Fed rate hike bets. Given how these latest inflation figures add to January's blowout jobs report, the dollar could edge higher in the short term," Otunuga added. Read More
Billionaire John Paulson: central banks are replacing dollars with gold, you are better off investing in precious metals than USD
Gold will increase in value while the U.S. dollar drops, said Paulson & Co. founder John A. Paulson. And that is the hedge fund manager's outlook for this year, the next three years, and the next five years.
"There has been a significant increase in demand from central banks to replace dollars with gold, and we're just at the beginning of that trend. Gold will go up and the dollar will go down, so you'd be better off keeping your investment reserves in gold at this point," Paulson told journalist Alain Elkann in an interview.
With gold, Paulson sees the potential for appreciation and recommends playing the long game. He highlighted the de-dollarization trend and noted that with sticky inflation fears and new geopolitical tensions, gold is attracting new investors.
"The dollar is still very dominant in terms of reserves and trade, but the U.S. post-WW2 economy is not quite the powerhouse it was," Paulson said. "Other countries do not want to rely on the dollar as much as they have in the past, and the U.S. also has an enormous deficit with the rest of the world in terms of trade and investment balances that used to be very positive, but now it's very negative."
The U.S. dollar is also looking at depreciation versus other currencies, Paulson said, pointing to massive money printing, fiscal spending, previous quantitative easing, and inflation. Read More
Gold lacks a driver for the next leg up, prices stuck in neutral - USBWM's Rob Haworth
The safe-haven bid and inflation fears that drove gold prices higher in the final months of last year and into January have run their course, and there is little new information that can push gold prices back above $1,900 an ounce, according to one market strategist.
In an interview with Kitco News, Rob Haworth, senior investment strategist at U.S Bank Wealth Management, said that he doesn't see any significant selloff for gold this year but does see signs that the market has peaked.
Haworth's roughly neutral outlook on gold comes as the precious metal struggles to attract new bullish attention, with prices falling below $1,850 an ounce. April gold futures last traded at $1,846.10 an ounce, down roughly 1% on the day.
He noted that although inflation remains elevated, it continues to trend lower; at the same time, recession fears also continue to ease. Haworth added that USBWM's economists expect the U.S. economy to narrowly avoid a recession this summer and growth to recover by year's end.
"The question investors need to ask themselves is what's next for gold," he said. "Looking back, we can explain and understand the price action of the last three months, but does that continue for the next six months? This could just be more volatility within a much broader trading range." Read More
Hawkish Fed forward guidance pressure gold lower
Gold continues to trade under pressure moving to lower prices after yesterday’s CPI report for January indicated that inflation declined to 6.4% year-over-year. January’s CPI report came in lower by 6.4% year-over-year, than the prior month of December. However, analysts were expecting a larger decline with expectations that yesterday’s report would come in between 6.2% and 6.3%. When combined with last week’s unexpected jobs report the collective information will allow the Federal Reserve to maintain its aggressive stance which means more interest rate hikes, and that rates will remain elevated longer.
While gold has traded under pressure there are bullish undertones that at some point could come into play. The dollar has been gaining strength when compared to other currencies, but for Americans, the dollar's purchasing power continues to be diminished, a byproduct of higher levels of inflation. The national debt continues to grow and the United States has reached its debt limit which means that the government will have to raise the debt ceiling which means that the United States will grow its national debt to a higher level.
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Gold futures basis the most active April 2023 contract is currently down $18.80 or 1.01% and fixed at $1846.60. Dollar strength was responsible for a little over half of today’s decline with the dollar gaining 63 points (+0.61%) and the dollar index is currently fixed at 103.76. 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.
