Today's Gold and Silver News - 27th July

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Gold looks good as the Fed will Pivot on Interest rates after the summer - Sprott's John Hathaway

The gold market has seen sharp declines in the last three months as the U.S. dollar and bond yields have soared higher; however, one portfolio manager is optimistic that the precious metal is close to carving out a bottom as prices hold support at $1,700 an ounce.

In an interview with Kitco News, John Hathaway, senior portfolio manager of Sprott Hathaway Special Situations Strategy, said that while gold still faces some challenging headwinds, the fundamental outlook is starting to shift.

Hathaway's bullish outlook on gold comes as markets look for the Federal Reserve to raise interest rates by 75 basis points on Wednesday. Hathaway said one of the reasons why he is bullish on gold is because the U.S. central bank is closer to the end of its tightening cycle than it is to the beginning.

He added that tightening monetary policy has probably already pushed the U.S. economy into a recession.

"The Federal Reserve's hawkish posturing is cratering the economy," he said. If you look at the economy on a real-time basis, it's declining. "Any sign that the Federal Reserve is relenting on rate hikes will be good for gold."

Hathaway said that he would expect the central bank to start to pivot and slow the pace of rate hikes by the end of the summer. He added that the central bank will not want to push the economy into a recession ahead of the November election.

"By the end of summer, inflation could moderate from 9% and the Fed will declare victory. But moderation is not a victory, inflation will still remain high and a problem for consumers," he said. Read More

India's international bullion exchange will launch on July 29th

Indian Prime Minister Narendra Modi will kick start the nation's first international bullion exchange (IIBX) at Gujarat International Finance Tec-City (GIFT City) on Friday. India is the second largest consumer of the yellow metal so it makes sense to have an exchange that ensures integrity and quality as well as fair trade.

He will also lay the foundation of the unified regulator International Financial Services Centres Authority's headquarters building. GIFT City is India's maiden International Financial Services Centre (IFSC). This has been an objective of the Modi administration for a long time and it now seems like the government is ready to take the relevant step forward.

A statement said "This shall empower India to gain its rightful place in the global bullion market and serve the global value chain with integrity and quality. This also re-enforces the commitment of the Government of India towards enabling India to be able to influence global bullion prices as a principal consumer," Read More

Gold prices remain under pressure as U.S. consumer confidence falls to 95.7

Gold prices are struggling to push into positive territory as pessimism grows among U.S. consumers, further raising fears of a potential recession.

American consumer confidence index fell to 95.7 down from June's reading of 98.7, the U.S. Conference Board reported Tuesday. Economists were expecting to see the index at 97.3.

According to economists the sharp drop in consumer sentiment could have a major impact on consumption and weigh on the economy heading into year-end.

The gold market is seeing some renewed momentum following the data. August gold futures last traded at $1,716.60 an ounce, down 0.16% on the day.

The report said that the drop in consumer optimism was due to a decline in the Present Situation Index, which fell to 141.3, down from June’s reading of 147.2. At the same time, the Expectations Index dropped to 65.3, down from June’s reading of 65.8.

Lynn Franco, senior director of economic indicators at The Conference Board, pointed out that the Expectations Index suggests recession risks continue to grow.

“Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers,” said Franco. “As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July. Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months.” Read More

Has the pain in the gold market run its course? - Carley Garner

For the past three months, the gold market has been trapped in a massive liquidation move as investors sell everything to hoard cash; however, one market analyst said that this phase in the gold market could be close to an end.

In an interview with Kitco News, Carley Garner, co-founder of the brokerage firm DeCarley Trading, said that gold has been largely ignored as investors having been "hitting the sell button across the board."

However, she added that gold won't be ignored much longer as speculative positioning has made it attractively undervalued.

"We are flushing out the last of the investors who are holding on with their fingernails. These are the people who have given up on the idea of higher gold and silver prices, which ironically is probably when things get close to turning the corner," she said.

The latest trade data from the Commodity Futures Trading Commission shows hedge funds are the most bearish on gold since May 2019.

"Some large speculators are close to being net short,which is you don't see very often in gold. When you do see that sort of thing, it's usually a sign that most of the, the pain, the downside pain is run its course," she said.

Carley's outlook on gold comments come as the precious metal continues to struggle to find consistent bullish momentum. However, the price is also holding critical support above $1,700 an ounce. Read More

IMF warns the 'world may soon be teetering on the edge of a global recession' as it lowers growth outlook

The International Monetary Fund has a severe recession warning as it forecasts slower growth for this year and next, according to its latest World Economic Outlook.

Global growth is now projected to slow to 3.2% in 2021, which is 0.4 percentage points lower than in April, the IMF said Tuesday.

"Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while U.S. consumer spending undershot expectations. Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide––especially in the United States and major European economies––triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine," the World Economic Outlook stated.

The number one priority is to tame inflation. But that could lead to real economic costs, including a global recession.

"The risks to the outlook are overwhelmingly tilted to the downside. The war in Ukraine could lead to a sudden stop of European gas imports from Russia; inflation could be harder to bring down than anticipated either if labor markets are tighter than expected or inflation expectations unanchor; tighter global financial conditions could induce debt distress in emerging market and developing economies," the report added. "A plausible alternative scenario in which risks materialize, inflation rises further, and global growth declines to about 2.6 percent and 2.0 percent in 2022 and 2023, respectively, would put growth in the bottom 10 percent of outcomes since 1970."

According to the outlook, inflation is expected to have the most significant impact on the world economy in 2023. Read More

Perth Mint sees solid global demand for gold, silver bullion

The start of the second half of the year may have marked a slow down in demand for bullion gold and silver in North America. However, the rest of the world continues to see a solid appetite for the precious metals, according to the Perth Mint.

In an interview with Kitco News, Sawan Tanna, Treasurer for the Western Australian-based mint, said that throughout the pandemic, production has been running flat out to meet the growing demand for bullion.

According to sales records, so far this year, the Perth Mint has sold more than 506,094 ounces of gold, down about 15% from the record year seen in 2021. The drop in sales reflects slightly weaker demand in the U.S.

The U.S. gold market has struggled to attract consistent bullish momentum even as inflation has pushed to a 40-year high. However, Tanna said that it's not surprising that gold demand in the U.S. has struggled as the Federal Reserve continues to aggressively raise interest rates. The U.S. central bank is expected to raise interest rates by another 75 basis points Wednesday.

However, looking past the North American market, Tanna said that Europe and Asia continue to see robust demand for physical gold and silver.

"The European Central Bank has been slower to react to inflation, so consumes are feeling the pressure more acutely there," he said. "Geopolitical uncertainty in Europe because of the war in Ukraine is also driving demand higher compared to the U.S." Read More

Dollar strength reverses modest gains from traders bidding gold higher

Currently both spot gold and futures are trading fractionally lower on the day. However, this is deceiving as market participants have been actively moving gold higher. It is dollar strength that is moving gold prices negative as dollar strength has outweighed any modest gains from normal trading.

Image Source: Kitco News

As of 3:40 PM EDT gold futures basis, the most active August contract is fractionally lower by 0.19% or $3.30 and fixed at $1715.80. At the same time, spot gold is also fractionally lower down 0.10% or $1.70, and fixed at $1717.76.

What is keeping gold from closing positive on the day is dollar strength. The dollar index is currently back over 107. After factoring in today’s gain of 0.67% the index is currently fixed at 107.065. An easy way to illustrate this is through the eyes of the KGX (Kitco Gold Index). The KGX screen capture above was taken at 3:38 PM EDT fixing an ounce of spot gold at $1718. Dollar strength was the strongest force as it moved gold an $11.20 lower. Market participants bid the precious yellow metal higher by $9.20 and tempered the effect of a strong dollar. This resulted in only a two-dollar decline in the net change in gold.

Gold has been tempered and kept in a narrow and defined trading range as market participants await the Fed decision after tomorrow’s conclusion of the July FOMC meeting. It is still widely anticipated that the Federal Reserve will raise rates by 75 basis points, the fourth consecutive rate hike over the last four FOMC meetings. Beginning in March the Federal Reserve began to raise rates first by 25 basis points, then 50 basis points in May. This was followed by a 75-basis point hike in June and most likely another 75-basis point hike tomorrow. Read More

Gold and silver trade marginally higher ahead of the European open

Gold (0.16%) and silver (0.06%) are both trading marginally higher ahead of the European open. Elsewhere in the commodities complex, copper (0.27%) has moved higher but spot WTI has pushed just under flat. 

Risk sentiment in the Asia Pac area was generally positive overnight. The Nikkei 225 (0.22%) and ASX (0.23%) closed higher but the Shanghai Composite (-0.14%) fell slightly. Futures in Europe are indicating a positive cash open. 

FX markets were subdued but the biggest mover was GBP/USD which rose 0.15%. In the crypto space, BTC/USD (-0.24%) is trading at $21,204.

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.