Today's Gold and Silver News - 16th August

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Silver Confirms Strength of Support at $20 Even as Recession Fears Mount in Europe

Silver is holding above $20 an ounce even with today’s slight dip in the price, once again reaffirming the strength of the support around this key level that the metal has now built up.

A weakening in the US dollar allied to the prospect of the Federal Reserve being less aggressive on its future monetary policy has given silver the breathing space to regain some of the ground it has lost since mid-April, however, it remains some way off those levels of a few months ago.

While silver has built up support around $20, the potential for the price to climb significantly higher is capped by two main drivers. The looming likelihood of a recession in Europe has the potential to reduce industrial demand for silver although the Fed may be less aggressive on future hikes, more interest rate increases are still likely, reducing the appeal of a non-yield bearing asset such as silver.

In this environment, where a lot of price action is based on rhetoric rather than reality, any indicators that give more clarity on the true picture will be closely analysed by traders and investors alike with this week bringing the minutes of the Federal Open Market Committee. Read More

Gold Starts New Week by Dipping Below $1,800 as Markets Assess Fed’s Next Move

Gold has started a new trading week by dipping a little below the key psychological threshold of $1,800 an ounce as traders assess the likely next move by the Federal Reserve.

Gold has performed well recently on the back of positive data out of the US that showed that inflation may have peaked while new jobs continue to be created. This has given the Fed more leeway on its next steps and increased the likelihood of fewer and less aggressive future rate hikes to bring inflation back down to its 2% target. 

However, while fewer rate hikes may now be needed, the reality is that more increases are still likely, including later this month. The difference is that the move is expected to be by 50 basis points rather than 75 basis points with the minutes from the Federal Open Market Committee, which are due to be released later this week, likely to give more clarity on how the Fed members see the next few months playing out.

It is interesting to note gold’s price action when it did climb back above $1,800 an ounce with today’s drop below that mark showing that there remain doubts about the medium-term outlook for the precious metal. Future rate hikes are negative for an asset that doesn’t pay a yield but that is partially offset by the increasing likelihood of a recession, particularly in Europe, which boosts gold’s haven appeal.

The next time gold regains a $1,800 toehold, how long it manages to retain that mark will be a clear indicator of how strong the support actually is for the metal. Read More

Markets are pricing in 'unsustainable contradiction' when it comes to low commodity price outlook, says Goldman

Investors anticipating lower commodity prices due to slower economic growth might be surprised by the lack of supply and persistent commodity inflation, warned Goldman Sachs, adding that the market is pricing in an "unsustainable contradiction."

"Today, commodity markets appear to hold irrational expectations, as prices and inventories fall together, demand beats expectations and supply disappoints," Goldman's head of commodities research Jeffrey Currie and his team said in a note last week.

The commodity market has shifted from hoarding supplies to destocking, expecting a slowdown in global growth to lower demand and add additional supply.

"Yet should this prove incorrect and excess supply does not materialize as we expect, the restocking scramble would exacerbate scarcity, pushing prices substantially higher this autumn, potentially forcing central banks to generate a more protracted contraction to balance commodity markets," warned Currie. Read More

Ghana's central bank to buy domestic gold in September to strengthen nation's foreign reserves

The Bank of Ghana is jumping into the gold market as it looks to shore up its foreign reserves.

Last week the African nation announced that it would launch a domestic gold-buying program in September. The central bank said it would pay market prices for the precious metal but make the payments in cedis.

Ghana's Vice President Dr. Mahamudu Bawumia said in a social media post that the new program represents a significant and sustainable addition to Ghana's foreign exchange reserves and will strengthen the country's balance of payments.

The new program has been in development for more than a year. In a presentation in June 2021, Ernest Addison, governor of the Bank of Ghana, said that the plan will allow the nation to double its gold reserves in the next five years.

Along with building its foreign reserves, the Bank of Ghana said the program would also support the nation's gold mining industry. Read More

Gold will play a big role in the coming global 'monetary reset' as U.S dollar loses its dominance - Maxime Bernier

A global monetary reset is inevitable, as fiat currencies are being debased due to excessive money printing. The U.S. dollar will be dethroned as the dominant global reserve currency by currencies backed by a basket of commodities including gold, according to Maxime Bernier, Founder and Leader of The People's Party of Canada.

"A commodity-backed money system will happen," he stated. "I don't know when, but a fiat money system cannot live too long. And after many decades, with all this debt and money printing across America and Canada and Europe, it will have to end." Read More

Gold, silver down amid weak China economic news, bearish outside markets

Gold and silver prices are solidly lower in midday U.S. trading Monday, on demand concerns for the metals after a batch of weak economic data from China. Sharply lower crude oil prices and a stronger U.S. dollar index to start the trading week are also bearish daily forces working against the metals. October gold futures were last down $19.60 at $1,785.70. September Comex silver futures were last down $0.443 at $20.26 an ounce.

China's central bank this week unexpectedly announced it is lowering interest rates and adding liquidity to China's financial system after some dour economic data reported for the world's second-largest economy. Chinese data on factory output, investment, consumer spending and real estate all weakened in July. The dour China news added to fears of a global economic recession. Covid restrictions and a troubled property market have helped to hobble China's economy in recent months. Other raw commodity prices on Monday also took a hit on the China news, led by a big drop in crude oil prices. China is a major global consumer of raw commodities, including metals. A weakening Chinese economy suggests less demand for raw commodities.

Technically, October gold futures bears have the overall near-term technical advantage. A fledgling price uptrend is now just barely in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the August high of $1,814.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,725.00. First resistance is seen at $1,800.00 and then at today's high of 1,808.20. First support is seen at today's low of $1,777.60 and then at $1,760.00. Wyckoff's Market Rating: 3.5.

Image Source: Kitco News

September silver futures bears have the overall near-term technical advantage. A fledgling uptrend on the daily bar chart has stalled out. Silver bulls' next upside price objective is closing prices above solid technical resistance at $22.00. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at $20.50 and then at today's high of $20.87. Next support is seen at $20.00 and then at $19.47. Wyckoff's Market Rating: 3.5. Read More

Image Source: Kitco News

Higher yields, strong dollar to knock gold price down to $1,650 by year-end - Capital Economics

Despite last week's gains, gold has kicked off the new trading week down 1% on the day. And Capital Economics is projecting more losses ahead as the strength of the U.S. dollar and rising Treasury yields pressure the precious metal down.

In its latest commodities update, the Capital Economics team said it sees gold ending the year at $1,650 an ounce. That is nearly $150 lower than current prices. At the time of writing, December Comex gold futures were trading at $1,796.50, down $19 on the day.

The outlook comes despite last week's gains of 1.5% following a slowdown in inflation. The CPI numbers came in below expectations last week, with the annual inflation running at 8.5%, following June's 9.1% print. Despite the quick rally, many analysts were disappointed with gold's failure to capitalize on the immediate move higher. 

The inflation news was initially positive for the gold space because it put a stop to market expectations of another aggressive move by the Federal Reserve at its September meeting, the Capital Economics' commodities team said in a report on Friday. Read More

Is gold's short squeeze over as hedge funds reluctant to make major bullish bets?

Is gold's short squeeze over as hedge funds reluctant to make major bullish bets?

However, some analysts also note that the latest data from the Commodity Futures Trading Commission shows that money managers are reluctant to make any significant bullish bets.

"Despite the narrative suggesting that inflation will be under control soon with rates peaking early and at relatively low levels, there were very few long positions taken out by specs. With gold continuing to move past $1,800/oz on Friday, it is likely that specs continued to cover short exposure," said commodity analysts at TD Securities. "But given strong messaging coming from Fed officials that a pivot to a more dovish policy stance is unlikely until there is strong evidence that inflation pressures are diminishing, it seems that specs will be unwilling to take on new large long exposure which is needed to support a sustained price rally."

The CFTC disaggregated Commitments of Traders report for the week ending Aug. 9 showed money managers increased their speculative gross long positions in Comex gold futures by 3,379 contracts to 100,013. At the same time, short positions fell by 21,500 contracts to 59,279.

Gold's net length now stands at 40,734 contracts, more than doubling from the previous week. During the survey period, gold prices managed to push above $1,800 an ounce but were not able to break any major resistance levels. Read More

Dollar strength and selling pressure resulted in gold plunging below $1800

A combination of traders actively selling gold futures and dollar strength caused gold to break below $1800 in trading today. Unlike last week when traders effectively bought the dip on the three days that gold traded to intraday lows between $1798 and $1800, this week's market participants contributed to the downward momentum. With last month’s FOMC meeting minutes set to be released on Wednesday traders are cautious and waiting to see if any new insights can be gleaned from the FOMC meeting minutes.

As of 5:20 PM EDT gold futures basis, the most active December contract is currently fixed at $1795.10 a decline of $20.40 or 1.12%. Gold traded to a high of $1818.90 and a low of $1787.60.

Image Source: Kitco News

The chart above is a daily Japanese candlestick chart of gold futures. This chart contains one trendline which was a support trendline created from two lows. The first low occurred in August 2021 when gold hit a low of approximately $1675. The second low occurred in the middle of May when gold traded to a low of approximately $1786. On June 30 and July 1 gold prices broke through the support trendline created at which time the support trendline became a resistance trendline. Read More

Future for gold yields is robust as monetary conditions tighten, says TD Securities

It is a misconception that gold does not offer a yield, at least when it comes to central banks, according to TD Securities, which sees gold deposits starting to pay robust yields.

"While yield generation from gold holdings is generally not available to most private investors, central banks can actively manage their holdings to generate returns," TD Securities head of commodity strategy Bart Melek said.

Central banks can either lend out their bullion reserves to earn the gold deposit rate or swap the precious metal for U.S. dollars at the gold offered forward rate (GOFO) or the swap rate, Melek summarized in the report.

Keep in mind that gold reserves are considered to be highly liquid holdings.

Over the past three decades, the gold lease rates fluctuated between three distinct periods.

Between 1989 and 1999, the 12-month gold lease rate averaged 140-200 basis points, which was very robust. Between 2000 and 2009, it averaged 54 basis points. And between 2010 and 2020, it was only 15 basis points, Melek pointed out. 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.