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Gold holding $1,700 as ECB raises interest rates but will U.S. dollar weakness last
The growing threat of inflation prompted the European Central Bank to surprise markets by raising interest rates across the board by 50 basis points, providing the euro with new momentum against the U.S. dollar and, in turn, pushing gold prices back above $1,700 an ounce.
Along with rising price pressures, ECB President Christine Lagarde also noted growing economic risks; however, she added that the central bank does not expect to see the European economy fall into a recession.
"The latest data indicate a slowdown in growth, clouding the outlook for the second half of 2022 and beyond. At the same time, this slowdown is being cushioned by a number of supportive factors," Lagarde said in her opening remarks. "Economic activity continues to benefit from the reopening of the economy, a strong labour market and fiscal policy support. Consumption is being supported by the savings that households built up during the pandemic and by a strong labour market."
Although the European economy faces growing downside risks, the ECB sees inflation as the biggest threat on the horizon.
"The risks to the inflation outlook continue to be on the upside and have intensified, particularly in the short term. The risks to the medium-term inflation outlook include a durable worsening of the production capacity of our economy, persistently high energy and food prices, inflation expectations rising above our target and higher than anticipated wage rises," Lagarde said.
Although the ECB expects to continue to raise interest rates through the rest of the year, markets saw little guidance on the steepness of the tightening path.
Lagarde said that the central bank would not provide any forward guidance on rate hikes and added that she didn't know where the neutral rate would be. Read More
Is the bottom in? Gold could see a bullish correction, bouncing off $1,700 - Moor Analytics
Gold drop from its March highs at $2,000 an ounce did a lot of technical damage and pushed gold into a downtrend; however, according to one technical analyst, the precious metal could be on the verge of establishing a new short-term bull move.
In a recent interview with Kitco News, Michael Moor, founder of Moor Analytics, said that gold's consolidation of around $1,700 an ounce in recent days could indicate the market's bearish momentum has run its course.
He noted that gold has held critical technical exhaustion levels just below $1,700 an ounce.
"With this year's selloff, we have violated every bull trend, so where the market stands now, the bias is still bearish. Still, we could see a bullish correction in the near-term," he said.
Moor added that it is a little too early to determine if a bullish correction has the potential to reserve the current trend. He said that one signal he is looking for is to see if gold prices can get back above $1,800 by mid-August.
Moor also said that although gold has struggled through most of the year, it can still make a run back to the highs above $2,000 an ounce if $1,700 holds as support. He said the fundamental price to watch would be around $1,850 an ounce.
"If gold got above $1,850, that would take out another major bearish pattern and you'd already be above a bullish pattern. To me, that would signal that there is a good likelihood of this taking a run to the highs again," he said.
However, on the downside, Moor warned that if gold prices fell below $1,686, the precious metal could see further sharp losses.
"The next really significant exhaustion level is down by $1,564.3 ounce," he said. Read More
Gold rebounds as ECB gets aggressive, crude pares losses, USDX down
Gold prices are moderately up in midday U.S. trading Thursday, on a short-covering and bargain-hunting bounce after prices hit a 15-month low overnight. Gold prices were also boosted today by crude oil paring sharp early losses, a dip in U.S. Treasury yields, and a weaker U.S. dollar index. August gold futures were last up $9.60 at $1,709.60. September Comex silver futures were last up $0.002 at $18.67 an ounce.
The European Central Bank Thursday raised its main interest rate by a more aggressive 0.5%. It was the first rate hike for the ECB in 11 years. The Euro currency rallied and the U.S. dollar index sold off on the news, which helped to lift gold and silver prices. The U.S. Federal Reserve is expected to raise its key interest rate by at least 0.75% at next week’s FOMC meeting.
Global stock markets were mostly weaker overnight. U.S. stock indexes are pointed mixed at midday. The U.S. stock index bulls are having a good week and have restarted near-term price uptrends on the daily charts.
Technically, August gold futures prices scored a bullish “outside day” up on the daily bar chart today, after hitting a 15-month low early on. Short covering and bargain hunting were featured. The gold futures bears still have the solid overall near-term technical advantage. Prices are trending lower on the daily bar chart. The recent “collapse in volatility” on the daily bar chart (whereby at least three price bars in a row are significantly smaller than previous price bars) suggested a bigger price move was coming soon, and it occurred Wednesday afternoon-Thursday morning. Bulls’ next upside price objective is to produce a close above solid resistance at $1,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00. First resistance is seen at this week’s high of $1,722.00 and then at $1,735.00. First support is seen at $1,700.00 and then at today’s low of $1,678.40. Wyckoff's Market Rating: 1.5.
Image Source: Kitco News
September silver futures bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at $17.00. First resistance is seen at this week’s high of $19.03 and then at $19.36. Next support is seen at $18.50 and then at $18.00. Wyckoff's Market Rating: 1.5. Read More
Image Source: Kitco News
Jim Rogers: A 'positive development' in Ukraine 'in the next few weeks' could cause a big rally, before a huge crash in stocks
Jim Rogers, Chairman of Rogers Holdings and Co-Founder of the Quantum Fund, is forecasting "the worst" bear market in his lifetime. Rogers, who is 79 years old, added that he expects a "big rally" in stocks if there is a peaceful resolution to the ongoing Ukraine conflict.
"My outlook is that if we have peace… if something happens in Ukraine, there will be a big rally," he said. "Oil will go down, grains will go down, and stocks will go up for a while."
Rogers spoke with Michelle Makori, Editor-in-Chief, and Lead Anchor at Kitco News, at the FreedomFest 2022 conference in Las Vegas. Read More
Gold bounces off $1678; the low of the August 2021 “Flash Crash”
While President Theodore Roosevelt’s statement “a date which will live in infamy” certainly does not apply to August 9, 2021, it is a date that professional gold traders will forever remember. Prior to the open of gold trading in New York, it was evident in Asia that a major move in gold was beginning to take place. It was a perfect storm in that there was extremely thin liquidity magnified due to the fact that the Japanese markets were closed due to a public holiday and that markets are typically illiquid during the trading session in Asia.
Image Source: Kitco News
The “Flash Crash” set up
Gold opened at $1807 on Friday, August 8, and selling pressure moved gold prices $63 lower closing at $1764. Selling pressure began in Asia and then London opening at $1764.80 on Monday, August 9. Gold tumbled 4.5% on the Asian open before bouncing 3.6% off the lows into the European open. The net result was a meltdown taking gold from its open of $1764 to an intraday low of $1678.40, an $80 price drop within the span of a single day.
Image Source: Kitco News
Gold did recoup a vast majority of its intraday decline. And even though gold dropped $60 in a matter of minutes gold prices bounced back from the initial drop and closed at $1726. While there have been other occasions in which gold prices have dropped dramatically, this is the only occasion in which gold dropped $60 in a matter of minutes and substantially recovered over half of the decline in a single day. Read More
Gold is trading flat ahead of the European open
After bouncing back through $1700/oz on Thursday gold is trading flat ahead of the European open. Silver is -0.17% lower trading at $18.81/oz. Elsewhere in the commodities complex, copper (0.68%) and spot WTI (1.03%) have pushed higher overnight.
Risk sentiment was very mixed overnight. The Nikkei 225 (0.40%) traded well but the ASX and the Shanghai Composite flat-lined. Futures are looking slightly soft ahead of the European cash open.
The dollar index moved 0.21% higher in FX markets. The biggest moving major pair was NZD/USD which lost 0.32%. In the crypto space, BTC/USD is trading at $23,155.
News from overnight: Read More
In this week’s Live from the Vault, Andrew Maguire inspects the fractures on COMEX’s price-setting mechanism, revealing the gaping divergence between the paper and physical silver markets.
The lifelong wholesaler looks closer at the unprecedented degree of gold and silver futures price backwardation, with the heavily oversold naked shorts bubble ready to burst.
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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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