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Gold Slides Close to $1,700 After High US Inflation Points to More Aggressive Fed Hikes
Hopes of gold holding at the September lows have proven false with gold continuing to fall to be barely holding above $1,700 an ounce.
The inflation data out of the US earlier in the week confirmed fears that the rate of the consumer price rises is still yet to peak and emboldening the need for the Federal Reserve to issue further aggressive rate hikes later this month and in the subsequent months.
In this climate, the talk has moved on from the potential of another 75 basis point increase to the possibility of the Fed hiking by 100 basis points when it meets at the end of this month.
Such sharp moves by the US central bank put gold under dual pressure as it typically sees the dollar strengthen as well as reducing the appeal of a non-yield bearing asset like gold.
Gold’s plunge has been pretty dramatic considering that it is typically less volatile than other asset classes yet it has seen about $100 wiped off its value so far in July. Investors will be clinging to the hope that $1,700 proves a threshold at which sufficient buying support kicks in to stem further declines. However, it was only a few weeks ago that similar thoughts were being said about $1,800, which ultimately offered up very little resistance. Read More
Silver is Sliding Again as Markets Price in Possibility of Record Interest Rate Hike by Fed
So much for silver showing signs of finally stabilizing with the price holding around $19 an ounce. A few days later and silver is on the slide once again to be verging on $18 an ounce.
The latest catalyst for silver’s decline is the prospect of the Federal Reserve increasing interest rates by 100 basis points, or one percentage point when it meets later this month. The US June inflation figure came in higher than forecast at 9.1% earlier this week, adding pressure on the US central bank to do more still to curb these ever-escalating prices.
Atlanta Fed President Raphael Bostic said earlier in the week that “everything is in play” when the committee meets. While a 75 basis point move remains the most likely option, this rhetoric about even stronger moves is punishing non-yield bearing assets such as silver as well as helping strengthen the dollar.
Aside from the fleeting respite glimpsed earlier in the week, silver has been punished by the markets for every incremental macro-economic event or comment and it is difficult to see where support can come from in the short-term. The bottom has proven impossible to call for silver but when it finally is found, the fundamental demand outlook paints a far rosier picture. Read More
Gold price holding support at $1,700 as U.S. retail sales rise 1% in June
The gold market is holding support at $1,700 as U.S. consumers appear to be on solid footing, buying more than expected in June.
U.S. retail sales advanced 1.0% last month following an upwardly revised drop of 0.1% in May, according to the latest data from the U.S. Commerce Department. Economists were expecting to see a rise of 0.9% in last month’s headline number.
Core sales, which strip out vehicle sales, also beat expectations and were up 1% last month versus the projected advance of 0.7%. The report’s control group, which strips out autos, gas, building materials, and food services, increased 0.8%, beating expectations of a 0.3% gain.
The strong gains in retail sales come as consumers saw inflation rise to its highest level in 40 years last month.
The gold market is seeing little reaction to the latest positive economic data. August gold futures last traded at $1,702.30 an ounce, down 0.23% on the day.
Economists note that the strong rise in retail sales will help ease fears that the U.S. is close to a recession. Economists have also said that the data also supports the Federal Reserve’s aggressive monetary policy stance. Read More
The gold market is holding its ground as New York Fed's Empire State Survey jumps to 11.1 in July
Activity in New York’s manufacturing sector is significantly picking up according to the latest report from the New York Federal Reserve.
Friday, the regional central bank said that its Empire State manufacturing survey's general business conditions index rose to a reading of 11.1 in July, up from June’s negative reading of 1.2 The data handily beat expectations as economists were looking for the index to fall deeper into contraction territory with a reading of -2.1.
“Thirty-four percent of respondents reported that conditions had improved over the month, and twenty-three percent reported that conditions had worsened,” the report said.
The gold market is seeing little reaction to the better-than-expected manufacturing data. August gold futures are holding support above $1,700 an ounce. August gold last traded at $1,705.50 an ounce, roughly unchanged on the day.
The components of the report showed some broad improvement. The New Orders Index rose to 6.2, up from June’s reading of 5.3. At the same time, the Shipments Index jumped to 25.3, up from the previous reading of 4.0. Read More
Gold holding relatively flat as UofM consumer sentiment rises to 51.1
The gold market is holding support at around $1,700 but is unable to hold any solid gains as consumer sentiment improves from last month’s 40-year lows.
Friday, the University of Michigan said that a preliminary estimate of its consumer sentiment survey rose to a reading of 50.0, up from June’s reading of 50.0. The data beat expectations as consensus forecasts were looking for a print of around 49.0.
The gold market is not seeing much reaction to the sentiment data. August gold futures last traded at $1,703.80 an ounce down 0.12% on the day.
Although the headline number was better than expected. The report noted that sentiment remains near historic lows as inflation pressures continue to grow.
“Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011,” the report said. “Consumers remained in agreement over the deleterious effect of prices on their personal finances. The share of consumers blaming inflation for eroding their living standards continued its rise to 49%, matching the all-time high reached during the Great Recession.”
The survey also shows that inflation fears could have peaked, even if prices remain elevated through 2023. The Survey noted that one-year inflation expectations dropped to 5.2%, down from last month’s level of 5.3%. Read More
The Metals, Money, and Markets Weekly: I is for inflation - By Mickey Fulp
Will $1700 become a sustainable support level for gold?
Over the two trading days gold futures have traded below $1700 (marked X) and, on both occasions, recovered closing above that case psychological level. So, it is not illogical to wonder whether or not this price point will become a sustainable level of support or simply a pause before gold heads to lower prices.
Image Source: Kitco News
Historically speaking the last time gold traded below $1700 occurred on August 9, 2021, the day of the "flash crash”. On Monday, August 9, 2021(marked a) gold opened at $1765 traded to a low of $1678, and closed at $1726. In this instance, $1700 played little technical importance within that one-hundred-dollar trading range. Before that gold traded below $1700 on two occasions in March 2021.
In both instances, gold traded to a low of approximately $1678. At the beginning of March 2021(marked b) gold traded below $1700 for three consecutive days before it moved above that price point. During the second instance that occurred at the end of March (marked c) gold broke below 1700 and then on the following day open below 1700 but closed well above that price point.
While historical studies can reveal many aspects and identify technical support and resistance levels, each identified example was caused by underlying fundamental events based on a unique set of factors and therefore may only offer fractional insight. More so, in each example over the last two years in which gold traded below $1700, it resulted in much lower prices before concluding and trading back above that price point. In fact, in all three examples highlighted on the chart, the price decline resulted in gold quickly moving below $1700 and trading to approximately $1680 before finding support. Read More
Bearish sentiment points to gold price falling below $1,700 next week
Growing bearish sentiment among Wall Street analysts and Main Street investors points to gold pushing below $1,700 an ounce in the near term, according to the latest Kitco News Weekly Gold Survey.
Sentiment in the gold market has soured in the few weeks as investors expect the Federal Reserve to aggressively raise interest rates to bring down inflation. In this environment, real yields have pushed higher along with the U.S. dollar, creating two major headwinds for the precious metal.
Gold dropped to nearly a one-year low this week as the U.S. dollar hit a significant milestone: hitting parity with the euro for the first time in 20 years. Analysts have said that although gold has fallen to S1,700, there has been no major capitulation move in the market.
Frank McGee, precious metals dealer at Alliance Financial, said that he expects gold prices to drop lower as more traders are forced to liquidate their losing gold positions.
Jim Wyckoff, senior technical analyst at Kitco.com, noted that the technical outlook shows that bearish traders are in control of the market in the near term.
"Charts are fully bearish and path of least resistance for prices remains sideways to lower," he said. Read More
Gold price at $1,700 is in a danger zone as markets enter Fed's blackout period before the July meeting
Gold has had a tough week as markets repriced rate hike expectations, and the strong U.S. dollar stole a lot of the safe-haven appeal away from gold. Next week, analysts remain cautious as the $1,700 an ounce level is a dangerous area for gold.
"Gold fell to an 11-month low as investors shunned the precious metal in favor of the USD amid the risk-off tone across markets," said ANZ's senior commodity strategist Daniel Hynes.
The precious metal is wrapping up the week down more than 2%, its fifth consecutive week of losses, which hasn't happened in several years. Year-to-date, gold is down around 7%. At the time of writing, August Comex futures were trading at $1,702.50 an ounce.
The main trigger behind this week's $40 selloff was the surprising U.S. inflation report, which showed annual price pressures rising 9.1% in June and led to the repricing of rate hike expectations for July.
Before the data was released, markets were looking for a 75-basis-point hike. However, after the inflation numbers, markets no longer ruled out an oversized 100-basis-point hike.
And this came after the Bank of Canada surprised the market with the 100-basis-point increase. "The increase of this magnitude is very unusual. Inflation is too high, and more people are worried that high inflation is here to stay," Bank of Canada Governor Tiff Macklem told reporters Wednesday. Read More
Inflation will remain high until 2026; ‘You don’t need a recession to bring down inflation,’ says Ex-Reagan advisor – Arthur Laffer
Reagan’s former economic advisor, Arthur Laffer, expects inflation to continue to accelerate, and to be well outside of the preferred range of 2 percent until 2026. Laffer, who is Founder and Chairman of Laffer Associates, nevertheless believes that inflation can be tamed.
The June inflation figure was 9.1 percent, the highest since 1981.
“You don’t need a recession to bring down inflation,” said Laffer. “We need tight money, and tax cuts to increase the supply of goods and services.”
Laffer, who advised U.S. Presidents Ronald Reagan and Donald Trump, explained that when taxes are cut, this causes firms and individuals to produce more, which reduces prices.
He said, “if you have a bumper crop in apples, what happens to the price of each apple? It goes down. If you have a bumper crop in the production of goods and services, what happens to the price of each unit? It goes down, the inflation gets stuck.”
Laffer spoke with Michelle Makori, Editor-in-Chief, and Lead Anchor at Kitco News, at the FreedomFest 2022 conference in Las Vegas. Read More
Gold and silver move higher ahead of the European open
Gold and silver have moved higher at the start of the new trading week. Gold is 0.44% higher while silver has moved 0.75% into the black. In the rest of the commodities complex, copper (1.56%) and spot WTI (1.83%) moved into positive territory.
Stocks started the week on the front foot as futures in Europe are positive and the Nikkei 225 (0.54%), ASX (1.23%), and Shanghai Composite (1.39%) closed positive.
In FX markets, the greenback has pulled back. The biggest mover is GBP/USD which has risen 0.35%. In the crypto space, BTC/USD (6.60%) is trading at $22,196.
News from the weekend: 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.
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