Today's Gold and Silver News - 24th August

Image Source: Unsplash

Gold's disappointing price action is a sign that metal is anticipating enduring deflation - Bloomberg Intelligence

After falling 3% last week, gold was trading near three-week lows Monday as the strong U.S. dollar continued to pressure the metal. But there could also be another reason for gold's poor price performance, according to Bloomberg Intelligence.

Year-to-date, gold is down 4.3% despite massive inflation concerns, which are still top of mind for central banks worldwide. And one potential explanation could be that the gold market has been looking for deflationary forces to win out in the long term.

"Gold's poor performance despite the greatest inflation in 40 years may show that the metal, considered a store of value, has been anticipating enduring deflation and is resuming its propensity to outperform most commodities," Bloomberg Intelligence senior commodity strategist Mike McGlone said in a note Monday.

McGlone added that gold is still early in its recovery against copper and crude oil, with the outlook for the precious metal looking promising.

"Our analysis with wheat shows the metal's tendency to surpass other commodities," he noted. "The juxtaposition between the ephemeral wheat-price spike in 1H and the store of value, gold, may play out in the metal's favor in 2H, with enduring implications. A key economic gauge for 2H may come from whether the gold vs. Bloomberg Commodity Spot Index ratio will recover from a support zone that has held since 2008."

Gold's two biggest obstacles in the first half of 2022 have been a strong U.S. dollar and an aggressive Federal Reserve. Yet, the result for gold could be a firm price foundation. Read More

Gold price could fall to $1,700 with U.S. dollar in an unstoppable rally

The gold market is trying to hold on to support around $1,750 an ounce. Analysts are warning investors that prices could drop back to last month's lows around $1,700 as the U.S. dollar continues to see significant upside momentum.

The U.S. dollar index is trading at 109 points, testing July's 20-year high. The greenback has pushed solidly above parity with the euro in what analysts have called an unstoppable rally.

As to how much momentum the U.S. dollar has, currency analysts at Brown Brothers Harriman said that a solid break above its 20-year high at 109.24 could lead to a run to 120.

"Can the dollar rally another 10% from current levels? Fundamentally, that seems hard to justify, but stranger things have happened," the analysts said. "We maintain our strong dollar call. As risk-off impulses ebb, the dollar should continue to benefit from the relatively strong U.S. economic outlook and heightened Fed tightening expectations."

Monday, currency analysts at TD Bank said that they were taking profits in their short euro trade against the U.S. dollar. However, they added that the euro could have room to fall further against the greenback.

Analysts note that the U.S. dollar is also supported by rising bond yields, with the 10-year yield pushing back above 3%. Analysts also point out that these are two significant headwinds for the precious metal.

The current market environment is taking its toll on gold as it tries to hold critical support levels. December gold futures last traded at $1,751.80 an ounce, up 0.19% on the day.

Analysts note that gold's future is entirely in the hands of the Federal Reserve, with markets predicting the U.S. central bank to maintain its aggressive monetary policy stance longer than initially expected. Read More

Stock market freefall will continue, won’t make new highs for 10 years – Gareth Soloway on Bitcoin, AMC, gold

The stock market rally that started in mid-June started to reverse by mid-August. Monday, the S&P 500 fell 2.1% by market close.

Gareth Soloway, Chief Market Strategist of InTheMoneyStocks.com, said that the volatility is not yet over, and in fact, stocks will likely see new lows.

“This is a fear of the Fed not backing off,” Soloway told David Lin, Anchor for Kitco News. “We got the minutes last week from the Federal Reserve meeting, that kind of was the end of the move. Right into those minutes are when we touched the 200-day moving average, which was the technical resistance level. And as soon as we heard from the Fed, it didn’t seem like they were as dovish as the market wanted.”

Soloway said that it is possible that stocks will not recover to their 2021 highs for many years.

“The stock market has made its highs in 2021. We will not take those highs out for five to ten years,” he said. Read More

Gold, silver rebound as USDX backs off, crude oil rallies

Gold and silver prices are higher in midday U.S. trading Tuesday, on short covering in the futures markets and bargain hunting in the cash markets, following recent selling pressure. The key "outside markets" are also in a bullish daily posture for the metals today, as the U.S. dollar index backed off a bit and crude oil prices were solidly higher. October gold futures were last up $13.80 at $1,752.40. September Comex silver were last up $0.147 at $19.03 an ounce.

U.S. stock indexes are weaker at midday. Traders and investors early this week are concerned about a still-aggressive Federal Reserve that is fighting problematic price inflation by raising U.S. interest rates at a rapid pace--even if it causes a U.S. economic recession. A Wall Street Journal news headline read: "Wall Street swings from greed to fear as the Fed's message sinks in." The marketplace is awaiting the late-week Jackson Hole, Wyoming Federal Reserve annual symposium, including a speech from Fed Chairman Jerome Powell Friday morning. Past Jackson Hole Fed meetings have significantly moved markets.  

Technically, October gold futures bears still have the firm overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the July low of $1,686.30. First resistance is seen at today's high of $1,757.60 and then at 1,775.00. First support is seen at today's low of $1,733.80 and then at this week's low of $1,730.40. Wyckoff's Market Rating: 2.5.

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 the August high of $20.87. The next downside price objective for the bears is closing prices below solid support at the July low of $18.01. First resistance is seen at last Friday's high of $19.48 and then at $20.00. Next support is seen at this week's low of $18.605 and then at $18.35. Wyckoff's Market Rating: 2.0. Read More

Image Source: Kitco News

Dollar declines after hitting twenty-year high resulting in solid gains for gold

During the March FOMC meeting, the Federal Reserve raised its key Fed funds rates by 25 basis points, marking the first rate hike by the Federal Reserve since 2018. This was the beginning of the Federal Reserve pivoting from an extremely accommodative monetary policy to a policy of monetary tightening. The Federal Reserve would continue to raise rates at each of the three FOMC meetings that followed. In May the Fed raised rates by 50 basis points, 75 basis points in June, and another 75 basis points in July. This took the cost of borrowing capital from virtually zero to 2 ½%.

With inflation rising at the highest pace in 41 years, the Federal Reserve was slow to initiate a series of rate hikes and had for too long been behind the curve. The greatest error made by the Federal Reserve was its assumption that rising levels of inflation were transitory and would naturally dissipate over a relatively short amount of time. The fact that the Federal Reserve was incorrect in its assumption would force them to initiate an extremely aggressive series of rate hikes over a short period of time.

Concurrently, the dollar index rose from 99.26 in March to its highest closing value in 20 years yesterday when the dollar index closed at 108.965. This also had a dramatic bearish impact on gold which hit its highest value in March this year trading at $2077 to its lowest value for 2022 on July 21, when gold futures hit a low of $1680.

Image Source: Kitco News

The chart above is a two-month Japanese candlestick chart of the dollar index. It identifies the last two times the dollar has traded to this value. The first occurrence was in 2000 when the dollar index broke above 109 and traded to a high of approximately 120. The second instance was during the correction that occurred immediately after hitting 120 in 2003.

Image Source: Kitco News

The chart above is a daily Japanese candlestick chart of gold futures. As of 5:45 PM EDT, the most active December 2022 contract is fixed at $1761.10 after factoring in today’s gain of $12.70 or 0.73%. The dollar index declined by 0.47% today which means that it accounted for roughly half of the gains in gold with the remaining gains directly attributable to market participants bidding the precious yellow metal higher. Read More

Gold price and silver price pop ahead of Jackson Hole, here's what to expect from Powell's speech

After a poor start to the week, the precious metals sector is seeing a turnaround as markets continue to calibrate for the Federal Reserve Chair Jerome Powell's keynote at the Jackson Hole symposium.

Gold and silver saw an impressive rally Tuesday as the U.S. dollar index retreated from 20-year highs and bargain hunters came in after last week's selloff.

At the time of writing, December Comex gold futures were trading at $1,764, up 0.90% on the day. And September silver futures were at $19.10, up 0.94% on the day.

The big catalyst for precious metals and the markets this week is Powell's speech at the Jackson Hole meeting on Friday, which only has a placeholder title for now — 'Economic Outlook.' But the symposium's overarching theme will be 'Reassessing Constraints on the Economy and Policy.'

"[The theme] suggests a focus on the economy's supply side … As pressure on global supply chains eases, that implies that a reduction in inflation could now be achieved with a relatively modest easing in demand. It is a key basis for our view that a recession can still be avoided over the coming quarters. The Fed is clearly hoping for a similar outcome, and officials may try to bolster that case next week," said Capital Economics senior U.S. economist Andrew Hunter.

The U.S. dollar and U.S. Treasury yields continue to be the dominant drivers for gold. Every time they rise, gold retreats, while any declines trigger a rally in the precious metal.

"The dollar continues to draw ample strength from risk aversion and fears over the Fed reasserting its hawkish message this week," said FXTM senior research analyst Lukman Otunuga. "If Powell fortifies expectations around the Fed moving ahead with another jumbo rate hike in September and more tightening ahead, this could boost the dollar. Alternatively, a cautious-sounding Powell that expresses concerns over the U.S. economic outlook may reduce the odds of big rate moves, weakening the dollar." 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.