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Silver Looking Downward in Face of Strong Dollar, High Rates
Silver has sunk back below $23 an ounce with the uptick that initially kicked off the week proving fleeting.
Silver is still having to battle against a strong US dollar and high-interest rates, both of which are bearish factors for the precious metal. With no immediate likelihood of the greenback suddenly weakening and with interest rates set to remain at their current levels for the next few months, the macroeconomic environment is likely to remain challenging for silver for a while yet.
Today’s move downward is more likely linked to gold’s own drop below $1,900 an ounce than any fresh sell-off specific to silver. Indeed, if silver was solely priced on the fundamental supply and demand balance, the metal would be trading significantly higher as mining operations are failing to keep up with industrial demand for this highly conductive element. Read More
Gold Succumbs to Dollar Pressure to Fall Below $1,900
Gold has finally fallen back below $1,900 an ounce under pressure from a strong US dollar and the sustained impact of high-interest rates that look set to stay higher for longer.
The surprise is not that gold has fallen below this threshold but the length of time it managed to remain at such elevated levels given the macroeconomic environment.
It will be interesting to note gold’s reaction over the coming days as from a purely macroeconomic perspective the price still looks overly high.
The main element that has kept gold supported in recent months has been the strength of institutional buying, particularly from central banks seeking to diversify away from the dollar. Read More
Gold, silver getting hammered by rising bond yields, strong greenback
Gold and silver prices are solidly lower in midday U.S. trading Wednesday, with December gold futures notching a 6.5-month low and dropping below psychological support at $1,900.00. An up-trending U.S. dollar index that hit a 10-month high overnight and a 10-year U.S. Treasury note yield that scored a 16-year high this week are bearish outside market elements for the two precious metals. December gold was last down $23.40 at $1,896.40 and December silver was down $0.381 at $22.815.
A still-hawkish Fed continues to squelch the metals market bulls. Today in my weekly “Front Burner" email report I mentioned respected JP Morgan CEO Jamie Dimon recently said the marketplace needs to be prepared for a 7% Fed funds rate in the coming months. The Federal Reserve's FOMC last week held the Fed funds rate steady, at a range of 5.25% and 5.50%. The present consensus of the marketplace is one more 0.25% rate increase, or maybe no more rate hikes at all. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%,"
Technically, December gold futures prices hit a 6.5-month low today. Bears have the solid overall near-term technical advantage and gained more power today. A five-month-old downtrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,913.60 and then at today's high of $1,921.70. First support is seen at the February low of $1,883.80 and then at $1,875.00. Wyckoff's Market Rating: 2.0.
Image Source: Kitco News
December silver futures bears have the overall near-term technical advantage. However, there are solid technical support levels just below the market that begin to suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at today's high of $23.12 and then at $23.39. Next support is seen at today's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0. Read More
Image Source: Kitco News
China's gold buying spree could reset fundamental price assumptions
Sky-high demand for gold from both China’s central bank and its citizenry might not be a short-term trend, but may actually be resetting the fundamental price assumptions of the precious metal, according to a number of analysts and market participants.
The People’s Bank of China (PBoC) has been buying gold at a torrid pace. According to updated foreign reserve data, China’s central bank bought 29 tonnes of gold in August, lifting year-to-date purchases to 155 tonnes. Last month's data was also the central bank's biggest purchase since December.
Gold is seen as an obvious way to support the value of the national currency, which has been under considerable pressure since COVID-19, and which continues to suffer from the impacts of onshoring and lower global demand for Chinese exports.
Gold is also viewed as the presumed cornerstone asset for the much-ballyhooed BRICS currency, a potential commodity-backed rival to the U.S. dollar, which has been gaining traction as the bloc welcomes major commodity producers into the fold, and which could move from theory to reality at next year’s summit in Russia. Read More
Gold could fall to $1,850 and then $1,800 after breaking below August lows
The headwinds from persistent strength in the U.S. dollar and 10-year bond yields over 4.5% have proved too much for the gold market as prices fall to their lowest level since March.
According to some analysts, the bearish momentum in gold could push prices back down to their 2023 lows at $1,810 in the spot market. Spot gold last traded at $1,873.32 an ounce, down 1.43% on the day.
"This move has had a lot of velocity ever since the FOMC rate decision," said James Stanley, senior market strategist at Forex.com.
The selloff picked up momentum on Tuesday after prices broke below the August lows at $1,885. Stanley added that while the March lows could now be a target, he sees some initial resistance around $1,850 an ounce.
Analysts note that gold's selloff comes after the Federal Reserve signalled that it expects to maintain a restrictive monetary policy for the foreseeable future, even as its tightening cycle comes to an end. The U.S. central bank's aggressive stance has pushed bond yields to fresh 16-year highs and the U.S. dollar to its highest level since November. Read More
"Higher for longer" results in a deep decline in gold prices breaking below $1900
Gold pricing can be best characterized as having a virtual price meltdown this week. Since Monday, gold has decreased by approximately $54 in value with two trading days remaining. Market participants are reacting to the extremely hawkish monetary policy of the Federal Reserve and its commitment to maintain and possibly increase the exceedingly high levels of interest rates with the intent of contracting the economy to a point in which consumer and corporate business spending slows to such a degree that it will bring inflation down to the Fed’s target of 2%.
Gold futures price decline as witnessed over the last three days:
For the third consecutive day, gold futures have had a substantial price decline. More alarming is the fact that the dollar decline has magnified. Gold futures were fixed at approximately $1945 on Monday, but after factoring in a nine-dollar decline, the most active futures contract closed at $1936. On Tuesday, gold prices opened below Monday’s closing price opening at $1935, and accelerated the price decline, giving up $16.80 to finally settle at $1919.80. Today, gold opened at $1918.80 and broke below a key and psychological level at $1900. As of 5:23 PM EDT, gold futures lost $28.90 or 1.51% to its current price of $1890.90. Read More
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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.
