Today's Gold and Silver News - 20th September

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TD Securities increases its tactical short position in gold, prices to fall to $1,580

The gold market is starting a new trading week below a critical long-term support level and one Canadian bank sees the bearish momentum as an opportunity to add to its short position.

In a note Friday, commodity analysts at TD Securities said that they were increasing their current tactical short position as they see prices falling to $1,580 an ounce in the next two months as markets see further aggressive action from the Federal Reserve through the rest of the year and into 2023.

TDS has been short gold since July 29, when gold was trading below $1,800 an ounce. The updated bearish outlook comes as December gold futures last traded at $1,674.50 an ounce., down 0.55% on the day.

The analysts at TD Securities said that they are increasing their tactical short position as the gold market continues to creep closer to a major capitulation moment.

"While rates markets are now increasingly discounting the potential for higher interest rates to persist for some time, our analysis suggests gold prices aren't pricing in the next stage of the hiking cycle," the analysts said. "After all, gold and silver prices have tended to display a systematic underperformance in the final stages of the hiking cycle, when markets expect the real level of the Fed funds rate to rise above the neutral rate as estimated by Laubach-Williams." Read More

Ray Dalio: Fed to move to 4.5%, stocks to drop by 20%

With the Federal Reserve continuing to pursue aggressive tightening, Ray Dalio, the billionaire founder of Bridgewater Associates, calculated that interest rates will have to rise to at least 4.5%, forcing stocks down by 20%.

"I estimate that a rise in rates from where they are to about 4.5 percent will produce about a 20 percent negative impact on equity prices (on average, though greater for longer duration assets and less for shorter duration ones) based on the present value discount effect and about a 10 percent negative impact from declining incomes," Dalio said in his latest LinkedIn post.

In order to get to the 4.5% interest rate estimate, Dalio looked at inflation and real yields. "The process starts with inflation. Then it goes to interest rates, then to other markets, and then to the economy," he explained.

And his outlook on markets and the U.S. economy is pretty gloomy. "Right now, the markets are discounting inflation over the next 10 years of 2.6 percent in the U.S. My guesstimate is that it will be around 4.5 percent to 5 percent long term, barring shocks (e.g., worsening economic wars in Europe and Asia, or more droughts and floods) and significantly higher with shocks," Dalio said when describing his inflation estimates. Read More

Gold weaker as FOMC meeting comes into focus

Gold prices are modestly down but up from daily lows in midday U.S. trading Monday. Silver prices are steady to slightly up. A higher U.S. dollar index and rising bond yields are limiting buying interest in the precious metals to start the trading week. As has been the case for quite some time, traders and investors appear to be favoring the perceived safe-haven greenback and U.S. Treasuries over the precious metals. October gold was last down $3.80 at $1,669.00 and December silver was up $0.009 at $19.39.

Marketplace focus is now on this week’s FOMC meeting that begins Tuesday and ends Wednesday afternoon. The FOMC is generally expected to raise the key U.S. Fed funds rate by 0.75% in the Fed’s effort to tamp down problematic price inflation. However, there is scattered talk the Fed could do a full 1.0 percent rate hike. One investment bank’s research team said the Fed raising 100 basis points is possible but not likely. The Bank of England also holds its monetary policy meeting later this week.

Technically, October gold futures prices hit a nearly 2.5-year low last Friday. The gold futures bears have the solid overall near-term technical advantage and gained more power today. Bulls’ next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at today’s high of $1,678.00 and then at $1,686.30. First support is seen at last week’s low of $1,651.90 and then at $1,635.00. Wyckoff's Market Rating: 1.0.

Image Source: Kitco News

December silver futures bears have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $21.00. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at today’s high of $19.69 and then at $20.00. Next support is seen at $19.00 and then at last week’s low of $18.77. Wyckoff's Market Rating: 2.5. Read More

Image Source: Kitco News

Gold analyst calls for this critical price level; gold stays suppressed as strong dollar 'weighs' down price - David Erfle

As gold falls below its support of $1,675, David Erfle, Founder of JuniorMinerJunky.com, said that a strong dollar is weighing down the precious metal. Gold and the U.S. dollar often move in opposing directions.

"The dollar has been the biggest weigher on the price of gold," he explained. "And of course, the Federal Reserve is continuing to raise interest rates."

Erfle spoke with David Lin, Anchor and Producer at Kitco News, at the Precious Metals Summit in Beaver Creek, Colorado. Read More

SocGen maintaining its safe-haven exposure in gold even as price action remains lackluster

The gold market may continue to suffer as the Federal Reserve's aggressive monetary policy strategy drives bond yields and the U.S. dollar high; however, one bank still sees it as an essential asset to hold in the current environment of heightened uncertainty.

Analysts at Société Générale said in their fourth quarter multi-asset portfolio report, said that they are maintaining their exposure to gold even as they reduce their overall exposure to commodities. The analysts said that having exposure to gold as a safe-haven asset will be important as central banks continue to push the global economy closer to a recession.

The optimistic outlook for gold comes as prices trade near a two-year low, testing critical long-term support at $1,675 an ounce. Last week commodity analysts at the French Bank warned that rising real bond yields could push gold prices as low as $1,550 by the third quarter of next year.

Although gold prices can go lower, SocGen remains overweight on gold.

"In the short term, gold could continue to suffer from higher real yields, themselves pushed up by further Federal Reserve rate hikes. However, from a portfolio construction standpoint, with expected rising recessionary forces at play and sticky inflation, on top of the Fed pivot (calling the peak of the USD itself), gold appears as a very defensive asset in troubled times," the analysts said in their latest report. Read More

Gold remains above $1680 a key technical level as traders await the FOMC meeting

Gold remains relatively muted as market participants await the start of the Federal Open Market Committee meeting tomorrow. As of 5 PM EDT gold futures basis, the most active December contract is currently trading at $1685 with a net gain of $1.50 today. The December contract opened at $1685.40, traded to a low of $1667.60 and a high of $1688.80.

Image Source: Kitco News

This is in contrast to the other precious metals, with palladium futures gaining 5.55%, platinum futures gaining 2.28%, and silver gaining 1.03%. All of the precious metals had fractional gains based on dollar weakness. The dollar index is currently fixed at 109.34 after factoring in a decline of 0.15%.

Market participants are anticipating the Federal Reserve to announce the latest interest rate hike after this week’s FOMC meeting on Wednesday. Beginning in March of this year the Federal Reserve raised the “federal funds rate” for the first time since 2018 by 25 basis points. They continued to raise rates at the May, June, and July FOMC meetings. The net result was the Fed moved rates from near zero to its current level of 225 - 250 basis points. According to the CME’s FedWatch tool, there is an 82% probability that the Fed will raise rates by 75 basis points on Wednesday. This would be the third interest rate hike of 75 basis points this year. Read More

Simultaneous rate hikes could lead to a 'string of financial crises,' warns World Bank

The global fight against inflation in the form of aggressive and simultaneous rate hikes by central banks is raising the risk of a recession and a string of financial crises in 2023, the World Bank said in a report.

The global trend of oversized interest rate hikes by many central banks is a risk to the world economy.

This kind of "a degree of synchronicity" between central banks has not been witnessed over the past five decades, said the bank in a new study published last week. But their efforts don't guarantee that the stubbornly high inflation will return to the levels needed.

"Investors expect central banks to raise global monetary-policy rates to almost 4 percent through 2023—an increase of more than 2 percentage points over their 2021 average," the report noted. "Unless supply disruptions and labor-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about 5 percent in 2023—nearly double the five-year average before the pandemic." Read More

Gold and silver move lower ahead of the European open

Gold (-0.22%) and silver (-0.58%) both trade lower leading into the European cash open. In the rest of the commodities complex, copper is flat but spot WTI is up around 0.60%.

Indices traded well overnight as the Nikkei (0.44%), ASX (1.29%), and Shanghai Composite (0.11%) all pushed higher. Futures in Europe are also projecting a positive cash open. 

In FX markets, the biggest mover was NZD/USD which fell 0.35%. The dollar index was largely static. In the crypto space, BTC/USD trades at $19,350. 

News from overnight: 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.