Today's Gold and Silver News - 22nd August

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Gold’s Good Run Brought to Abrupt End by Reality Check By Hawkish Fed Officials

Gold’s positive run has come to an end with the price dropping to near $1,750 an ounce as the prospect of the Federal Reserve still needing to implement a series of significant interest rate hikes to bring inflation under control.

St Louis President James Bullard has urged the Fed to make another 75 basis points while Kansas City’s Esther George stated that “the case for continuing to raise rates remains strong”.

These views from two voting members of the Federal Open Market Committee have brought a reality check to the view that the US central bank may be more dovish in its approach following promising recent economic data with gold pulled down due to its diminished appeal at times of rising interest rates due to its lack of yield.

Gold has also suffered in the face of the US dollar strengthening on the back of these hawkish comments by the Fed officials, with gold’s typically inverse relationship with the dollar seeing its price fall while the dollar gains. 

This reality check on the trajectory of future Fed rate rises has brought an abrupt reversal in gold’s attempts to climb back above $1,800 an ounce, and with the prospect of more large hikes in coming months, investors will be looking downwards to the July low below $1,700 an ounce as the next significant support rather than at any upward landmarks. Read More

Silver Slips Back Below $20 In Wake of Fed Officials Reminding of Need for More Hikes

Silver’s support above $20 an ounce has broken down with the price slipping back into $19 an ounce territory following hawkish comments by two senior Federal Reserve officials that pointed to more large interest rate hikes still needed by the US central bank to bring inflation back to its 2% target.

This reminder that more increases in benchmark interest rates are still very much needed in the US, despite recent promising economic data out of the country, has brought down silver as its lack of yield makes it less attractive at times of rising interest rates due to its lack of yield. 

A hawkish Fed was the catalyst for silver’s multi-month plunge from April through to July but while silver is once again falling, the reaction this time around is likely to be more muted with the price already trading at the lower end of its recent range. 

The low reached during that July nadir is likely to prove the bottom for silver and with more support for the metal having built up in recent weeks, investors will be hoping that today’s declines prove temporary and it can at the very least hold on to its current levels if not climb back above $20 in the very near future. Read More

Dollar strength results in the largest single weekly advance since March 2020

Yes, gold has declined for the last five consecutive days. On Monday, August 15 gold opened at approximately $1816 per ounce and scored strong price declines over the last five consecutive days, characterized by four lower highs, and four lower lows taking the most active December contract of gold futures to $1760 with under a half hour of trading before closing for the weekend. In a single week, gold lost $56 in value. Gold sustained a price decline of approximately 3.083% over the last five trading days.

Image Source: Kitco News

This is significant but certainly not extremely rare. Historically speaking we can easily identify weeks in which gold had a significant drawdown greater than this week’s price decline. Only five weeks ago, during the week of July 4 gold sustained a weekly drawdown of $71. This represents a weekly price decline of 3.861%.

On the other hand, the gains this week in the dollar index are rare and I believe extremely significant. In terms of percentage decline, gold did experience a larger percentage drop than the dollar gained. The weekly advance for the dollar index is 2.217%. However, to identify the last instance the dollar declined this deep in a single week occurred during the week of March 16, 2020, well over two years ago. In a single week, the dollar index opened at 98.46 and closed at 103.48, a strong price advance of 502 points which is a weekly gain of 4.851% more than double this week’s gain. Read More

What makes gold an excellent hedge against inflation

With Inflation still rising, CPM Group's Jeffrey Christian takes a look at the relationship between inflation and gold, and how investors should understand gold’s power as an inflation hedge. Jeff also reflects on the passing of Endeavour Silver's Brad Cooke and his contributions to the silver industry. Read More

Expect 'collapse' and 'unrest'; Hedge using gold, guns, livestock, and land - Tom Luongo

We are entering a time of “institutional collapse” and “institutional unrest,” said Tom Luongo, Author and Publisher of the Gold, Goats ‘n Guns newsletter, who advocates investors look into guns, livestock, land, and gold as assets for their portfolio.

“You’re buying guns as insurance against your tangible assets, against someone stealing them from you,” he said. “Well, inflation is also theft. It’s theft of purchasing power over time, so that’s why you’re supposed to buy gold.”

Luongo emphasized that although investors had experienced forty years of bull markets in bonds and equities, “nothing lasts forever.”

“The current [monetary and financial] architecture is unsustainable, but it’s also not going to go away completely,” he said. “You’re going to have to re-learn everything you learned in your life.”

Luongo spoke with David Lin, Anchor and Producer at Kitco News. Read More

Wall Street turns bearish on gold price, warns of volatility ahead of Jackson Hole

 As gold ends the week down 3%, Wall Street is turning negative on gold for next week, blaming a strong U.S. dollar and pressure from the upcoming Jackson Hole Symposium.

Gold folded under pressure from the greenback on Friday as the U.S. dollar index climbed to 20-year highs. December Comex gold futures were last trading at $1,763.10, down 3% on the week.

Markets remain focused on any Federal Reserve speakers after the FOMC meeting minutes from July showed that Fed officials agree on the need to eventually slow down their tightening cycle. Still, they first need to see how their rate hikes impact inflation.

All eyes next week are on Fed Chair Jerome Powell's 'Economic Outlook' speech at the 2022 Jackson Hole Economic Policy Symposium, which is scheduled for Friday morning.

"All eyes are on Jackson Hole symposium. Powell's remarks for next week are one of the key avenues that the Fed could use against the market starting to price in a rate cut cycle next year following this year's tightening. We think market expectations are inconsistent with the Fed's inflation targeting mandate. Expect rates to remain elevated and sap the interest out of precious metals," TD Securities commodity strategist Daniel Ghali told Kitco News. Read More

The Metals, Money, and Markets Weekly: M is for Malarkey - Mickey Fulp 

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Can Fed Chair Powell's Jackson Hole speech give gold price its break next week?

Gold is wrapping up the week down more than $50 as a strong U.S. dollar is weighing on the precious metal ahead of the Jackson Hole economic symposium.

It is not surprising to see gold react to the greenback's strength, as it has been facing this particular obstacle for most of the summer with the Federal Reserve aggressively raising rates.

"The dollar is on fire. It is rising against all the major currencies and cutting through key technical levels like a hot knife in butter," said Bannockburn Global Forex managing director Marc Chandler. "Gold, which began the week near $1,800 is testing support near $1,750 now."

At the time of writing, December Comex gold futures were trading at $1,763 an ounce, down 3% on the week.

Next week's big catalyst will be the Federal Reserve Chair Jerome Powell's keynote at the Jackson Hole titled 'Economic Outlook,' which is scheduled for Friday.

Markets remain divided on whether the Fed will hike rates by 50 or 75 basis points at its September meeting. The CME's FedWatch Tool shows a 56.5% probability of a 50bps hike and a 43.5% chance of a 75bps increase.

The markets will be keenly watching any change in the Fed's stance on rates, RJO Futures senior commodities broker Bob Haberkorn told Kitco News.

"The Fed will likely hold the line on higher rates going forward. That's why gold is slow and steady lower right now. If there is some change at the Jackson Hole symposium, it could impact the gold market significantly. But that is not anticipated. Yet, they could say something about the housing market slump or the retail sector," Haberkorn said. "Overall, the stock market is not in bad shape considering the rate hike talk. Is the equity market telling us that the Fed won't be as aggressive? The gold market tells us a different story because gold competes against Treasury yields." Read More

Markets are wrong about Fed pivot; Powell will keep raising rates, and a year-long recession will ensue - Danielle DiMartino Booth

Despite a poor performance over the year, stock markets have rallied recently, with the S&P 500 up by 8.8 percent over the last month. This is partly due to expectations that the Fed will pause with its tightening cycle, or pivot and start reducing rates early next year.

Danielle DiMartino Booth, Founder and CEO of Quill Intelligence, said that the markets are wrong and that Jerome Powell has no intention of easing up on tightening. She also forecasts a prolonged recession.

“Even if the Fed does pause its rate hiking campaign, it will want to continue with quantitative tightening, and not ease anytime soon,” she said. “We’re going to remain in a recession… for at least four quarters.”

She was confident that the Fed would not pivot, adding “I will be the first to say I am wrong if we see a major Powell pivot. And it would be mea culpa and I will be slaughtered on Twitter. And I’m fine with that too.”

DiMartino Booth spoke with Michelle Makori, Editor-in-Chief and Lead Anchor at Kitco News. Read More

Silver to face a supply crunch coupled with a demand surge; in 10 years, no investment will be better than silver - David Morgan

Silver supplies will be depleted and industrial demand will “suck up all the silver that’s available,” over the next ten years, causing silver prices to rise, and making it the best investment in decades, according to David Morgan, Founder and Author of The Morgan Report.

“If you’ve got a long time horizon, like ten years or more, I can’t think of something that would be better than a silver investment,” he said. “Silver will shine at some point… but it’s probably going to take a natural corner… a natural corner is when industry alone sucks up all the silver that’s available and there isn’t any left.”

Morgan told David Lin, Anchor and Producer at Kitco News, that the silver supply could run out within a few decades.

“The [U.S. Geological Survey] said that silver would be the first element on the periodic table that would be in such short supply, and that was a few years back,” he said. “Just the industrial side alone is probably going to take all the silver available at some point in time.” 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.