Today's Gold and Silver News - 25th October

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A Shift in Mood Surrounding Fiscal Tightening Boosts Gold

A growing belief that the peak of the Federal Reserve’s restrictive monetary policy may be near, in conjunction with the slowdown of the US dollar, saw gold close last week rebounding from the recent lows at $1,620 and return above $1,650.

Investors are relatively sure that the Federal Reserve will hike rates by another 75 basis points next week, bringing them from 3.25 to 4.00%. But at the same time, there is rising optimism that this will be the last hike of this magnitude. In other words, the futures market is pricing in – according to CME Fedwatch Tool – over a 50% probability that in December’s FOMC meeting, rates will be increased by “only” 50 bps instead of 75 bps. That would leave interest rates at the end of 2022 at 4.50% (and not at 4.75%). Read More

Weaker US Dollar Helps Silver to Rebound Above $19

The slowdown of the US dollar and the stock market rebound seen in the last few hours of the previous week triggered a quick rally of the silver price. The precious metal rebounded from $18.5 to $19.4, before slightly declining in the early trading this morning to $19.25. 

According to a Wall Street Journal report, Fed officials are still uncertain about the interest rate decision that will be taken in December and there could be a chance of seeing a smaller hike (50bps instead of 75bps). Following these rumours, stocks jumped, with the Dow Jones index climbing to 31,000 points. This rising sentiment also boosted precious metals, which were aided further by the decline of the greenback. Read More

Gold prices push into neutral territory as flash PMI shows contraction in U.S. manufacturing and service sectors

The gold market is retracing some of its losses, pushing into neutral territory above $1,650 an ounce as activity in both the service and manufacturing sectors appear to be contracting.

Monday, the S&P Global Flash U.S. Composite PMI said its flash manufacturing PMI data fell to 49.9, down from September's reading of 52. The data was worse than expected; according to consensus estimates, economists were looking for a reading around 51.0.

Meanwhile, activity in the service sector was weaker than expected, falling deeper into contraction territory at 46.6, down from the September reading of 49.3. Economists were looking for a print of around 49.6.

Although gold prices managed to attract some safe-haven buying momentum, there appears to be some sticky resistance around $1,650, keeping prices chained near that level. December gold futures last traded at $1,655.30 an ounce, roughly neutral on the day. Read More

Yellen is monitoring 'potential vulnerabilities,' cites 'serious global headwinds', promises to improve Treasury market

Even though the U.S. economy is still showing "significant strength," Treasury Secretary Janet Yellen said she is monitoring "potential vulnerabilities" amid severe global headwinds. And one of the immediate priorities for Yellen is to bolster the Treasury market.

"We are at an important moment for the global economy. In the United States, we are focused on transitioning our economy to stable and sustained growth. The U.S. economy retains significant strength. But inflation remains too high, and we are contending with serious global headwinds," Yellen said during her speech at the Securities Industry and Financial Markets Association Annual Meeting Monday.

The current environment is "dangerous and volatile," and Yellen is concerned about the spike in energy prices and extreme volatility in financial markets.

It's an environment where "financial stability risks could materialize," Yellen said, responding to one of the questions following her speech. Read More

Gold bulls remain timid amid strong dollar, rising bond yields

Gold prices are slightly lower in midday U.S. trading Monday. Silver prices are modestly up. The precious metals market bulls remain constrained by a still-strong U.S. dollar index despite today's mild losses in the index. Rising government bond yields are also negative for the precious metals. Lower crude oil prices to start the trading week are also bearish for the metals. December gold was last down $2.00 at $1,654.30 and December silver was up $0.134 at $19.20.

U.S. stock indexes are higher at midday and extended Friday's solid gains. There are now some early chart clues the U.S. stock indexes have put in market bottoms, and that's also weighing on the safe-haven metals. The stock market gains come following a Wall Street Journal report Friday that suggested the Federal Reserve will slow down the pace of its monetary policy tightening after its November meeting, at which the Fed is expected to raise the Fed funds rate another 0.75%.

Technically, the gold futures bears have the solid overall near-term technical advantage. 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 $1,675.50 and then at $1,685.00. First support is seen at today's low of $1,648.00 and then at $1,635.00. Wyckoff's Market Rating: 1.5.

Image Source: Kitco News

The silver bears have the firm overall near-term technical advantage. However, recent price action suggests a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $21.31. The next downside price objective for the bears is closing prices below solid support at $17.40. First resistance is seen at today's high of $19.675 and then at $20.00. Next support is seen at $19.00 and then at $18.50. Wyckoff's Market Rating: 3.0. Read More

Image Source: Kitco News

The Federal Reserve will break something and that will be good for gold - Axel Merk

Investors can expect gold prices to remain volatile for the foreseeable future as markets react to ever-changing interest rate expectations; however, the precious metal still provides long-term value and protection in a portfolio, according to one hedge fund manager.

In an interview with Kitco News, Axel Merk, president and chief investment officer of Merk Investments, said that while many investors have been disappointed with gold's price action through 2022, he notes that it has outperformed both bond and equity markets this year.

Many analysts have pointed out in recent weeks that the traditional 60/40 portfolio allocation has seen its worst start to the year since the mid-1930s. The S&P 500 is down more than 20% this year and an aggregate of bonds is down roughly 15%. Meanwhile, gold prices are down about 10% so far this year as prices continue to hold support at around $1,650 an ounce.

"Right now, diversification doesn't work because everything is correlated," he said. "But over the long run, we know that having a diversified portfolio does work," he said.

In the current environment, Merk said that it is important for investors to look past short-term volatility and focus on long-term value, which is where gold potentially shines brighter. Read More

Market participants continue to be headlined driven as seen in gold on Friday

Gold investors and traders are reacting strongly to any shift in the Federal Reserve’s narrative concerning upcoming interest rate hikes. This was seen on Friday when a single article published by the Wall Street Journal resulted in strong gains for gold. On Friday Mary Daly the president of the San Francisco Federal Reserve Bank said, “I think the time is now to start talking about stepping down – the time is now to start planning for stepping down,”.

Image Source: Kitco News

While the consensus amongst investors and economists is that the Federal Reserve will raise rates by 75 basis points at the FOMC meeting in November, we saw a dramatic shift in market sentiment for the December rate hike as seen through the eyes of the CME the FedWatch tool.

On Friday the FedWatch tool predicted that there is a 46.3% probability that the Fed funds rate will be between 450 and 475 basis points by the end of 2022. This greatly differs from last Thursday’s prediction which indicated a probability of 75.4 %. Today the FedWatch tool is predicting that there is a 53.7% probability that the Fed’s benchmark by year-end will be between 450 and 475 basis points.

What caused the dramatic shift in Fed funds futures contract pricing on Friday was speculation amongst Federal Reserve officials as to whether or not to begin to decrease the size of the rate hike in December. 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.