Today's Gold and Silver News - 28th July

Image Source: Unsplash

Gold Stable at Around $1,720 Ahead of Federal Reserve’s Latest Interest Rate Decision

Gold is holding around $1,720 an ounce, illustrating that this is the natural threshold for the precious metal having stabilised in the region after a brutal plunge earlier in the month.

How long gold continues to hold around its current levels after this short-term stabilisation will be largely defined by the market reaction to the Federal Reserve’s latest interest rate decision later today.

As the overwhelming expectation is for the Fed to implement a second consecutive 75-basis point hike, the likelihood that after an initial period of volatility immediately following the announcement, prices across the majority of markets will largely settle back to where they are now with the news long-since priced in. 

The concern for gold investors will be that a similar scenario was in play at the start of this month yet that didn’t prove sufficient to prevent a drop of $100 in a matter of days. The counter-argument is that with gold a natural hedge against inflation, the war in Ukraine showing no sign of easing and fears over a recession, there is strong enough support at gold’s current price to ensure it holds above $1,700 later today. Read More

Silver Faces Nervy Wait Ahead of Fed’s Latest Move After Previous Hikes Sparked Plunge

Silver investors face a nervy wait ahead of the Federal Reserve’s latest interest rate decision later today.

While the metal’s price is finally showing signs of stabilising a little below $19 an ounce, the actions of the US central bank have been the biggest catalyst of silver’s dramatic price plunge since mid-April.

The strong consensus is that the Fed will implement another 75 basis point move to its benchmark rates and given how long this has been the talk of markets, the expectation will be that the reaction to this is already fully priced into silver’s price.

However, with silver more prone to volatility than its golden peer due to its comparatively lower trading volumes, a sharp negative reaction when confirmation hits of another large Fed hike can’t be ruled out.

The hope that silver bulls will cling to is that the metal is already at a considerable discount to its fair value with the recent trading activity pointing to a market having reached its bottom. Furthermore, the fundamental outlook remains supportive with silver a key component of key industrial sectors for the energy transition, notably in photovoltaic cells for solar generation and in batteries for electric vehicles. 

The key question will be how far out is the market looking? Could there yet be more short-term pain for silver before that sunnier horizon hoves into view? Read More

Gold price holding its ground as the Federal Reserve raises interest rates by 75 basis points

The gold is seeing some modest buying pressure even as the Federal Reserve expects to continue to tighten monetary policy this year as it acknowledges slowing economic momentum.

As expected the Federal Reserve raised interest rates by 75 basis points. However, according to some analysts, markets have been looking past today’s decision and are focusing on the central bank’s forward guidance.

In its monetary policy statement, the central bank said it “anticipates that ongoing increases in the target range will be appropriate.”

The gold market is holding its ground following the latest decision. August gold futures last traded at $1,720.80 an ounce, up 0.18% on the day.

Although the Federal Reserve is looking to tighten interest rates further, it did note that economic activity is slowing. However, inflation remains the committee’s top priority.

“Recent indicators of spending and production have softened. Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the statement said. “Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.”

The central bank also left some room open to a softening of its stance if the economy continues to weaken.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” the statement said. Read More

Gold stages a relief rally after the Fed announces a 3/4% rate hike

As anticipated the Federal Reserve concluded the July FOMC meeting with an announcement that they will raise rates by 75 basis points or 3/4%. While this was overwhelmingly expected as opposed to a larger 1% rate hike, there were subtle changes in the statement as well as comments made by Chairman Powell during the press conference.

A change in the Chairman's tone

In essence, for the first time in any press conference this year, the chairman expressed a slightly more dovish tone than previously expressed regarding rate hikes. While he continued to toe the line that all future decisions will be data-dependent, he added for the first time since the Fed began to raise rates that the Federal Reserve feels it is 'likely appropriate to slow increases at some point. That being said, he offered no real insight as to a timeline of when this might occur.

With the second quarter GDP report coming out tomorrow and advanced estimates by the Atlanta Federal Reserve predicting an economic contraction of 1.6%,  Chairman Powell put a spin on the current economic outlook.

"I do not think that the U.S. is currently in a recession, and the reason is there are just too many areas of the economy that are performing too well. To be sure, growth is slowing for reasons that we understand. Growth was exceptionally high last year, 5.5%. We would have expected growth to slow. There's also more slowing going on now."

The chairman did add that preliminary GDP numbers should be taken with a grain of salt.

Gold reacts with positive price gains and the dollar weakens

Gold traded to a low of $1709.10 in overseas trading before the release of today's report. Gold began to gain strength immediately following the release of the report and strengthened as Powell spoke during the press conference. Gold futures basis the most active August contract traded to a high of $1739.60.

Image Source: Kitco News

As of 4:43 PM, EDT August gold is currently fixed at $1733.10 a net gain of $15.40 or 0.90%. Concurrently, the dollar declined in value today giving up 0.68% or 0.729 points with the dollar index currently fixed at 106.315. Read More

World Gold Council sees flat gold demand in 2022 as market loses momentum in Q2

The gold market saw robust physical demand in the first half of the year, but slowing growth in the second quarter has prompted the World Gold Council (WGC) to lower its outlook for the rest of the year.

The WGC said that the challenging economic environment presents obstacles and opportunities for the precious metal. In their mixed outlook, the analysts said that persistent inflation pressures coupled with growing market uncertainty will support gold prices through the rest of the year. However, solid momentum in the U.S. dollar will act as a significant headwind.

"Some macroeconomic factors such as aggressive monetary policy tightening and continued U.S. dollar strength may create headwinds, but upside surprises for gold investment remain firmly on the table," the analysts said in the report.

The WGC downgraded its 2022 outlook in its second-quarter trends report published Wednesday. The WGC sees demand relatively flat by year-end.

The report said that physical gold demand fell by 948 tonnes or 8% compared to the second quarter of 2021. However, physical gold demand in the first half of the year totalled 2,189 tonnes, up 12% compared to the first half of last year.

"Although H1 ended well, with bar & coin, ETF and OTC demand combined posting the third largest H1 since 2010, Q2 set a slightly weaker tone for ETFs, which has continued so far in July. And this may set a precedent for the rest of H2 given a potential softening of inflation amid aggressive monetary policy tightening," the analysts added.

Although gold demand could soften through the second half of the year, the WGC doesn't expect to see the market collapse. The analysts said that there is enough market uncertainty to support demand.

"Although inflation may start to tail off in H2, the supply situation in many commodity markets remains precarious and renewed spikes can't be ruled out. Such an environment would further highlight the safety of gold. After all, gold's relative performance remains solid in 2022, buttressing its diversification benefits compared to other hedges," the analysts said. "In addition, geopolitics are always a wild card and remain top of mind for investors. And finally, net investor positioning in futures is historically short, presenting a short-covering risk on a positive price trigger." Read More

Gold and silver move higher ahead of the European open

Gold (0.40%) and silver (1.13%) are both trading higher as risk sentiment shifted positively overnight. In the rest of the commodities complex, copper (0.81%) and spot WTI (0.68%) are also trading in positive territory as commodities catch a bid. 

Indices also moved higher overnight as the Nikkei 225 (0.36%), ASX (0.97%) and Shanghai Composite (0.26%) all moved into the black. Futures in Europe are also pointing towards a positive cash open. 

In FX markets, the dollar index is down 0.26%. The biggest mover overnight was USD/JPY which fell 0.86%. In the crypto space, BTC/USD (0.92%) is trading at $23,155.

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.