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Gold/Silver: Next week's probable ranges
The day we have been waiting for has finally arrived and passed as markets put significant weight on each of Jerome Powell's words. He hit on all the "hawkish" bullet points and even discredited the softer July PCE data. The message was a blow to investors, triggering a rise in the U.S. Dollar and Treasury yields which weighed in on Precious Metals. As you can see from our correlation matrix below how it is crucial to monitor rolling correlations as the 10-day Gold/Dollar correlation was -58%, and now the 5-day correlation is -97%, meaning "if the Dollar goes up, Gold is heading lower.
Daily Gold Chart
Image Source: Kitco News
Given the rally from the July lows, we suspected some pullback would happen before determining the next trending direction. Gold must regain $1800 and Silver $20 to keep the bullish momentum alive for the remainder of the year. The first level of support comes at $1750, $1700, and $1685. While Gold and Silver ETF holdings continue to decline, the market is less impacted by supply and demand and more focused on the U.S. Dollar, Treasury yields, economic data, and speculation on the duration of Fed rate hikes. Unfortunately for the bull camp today, Jerome Powell could not field questions after the Jackson Hole symposium. In the past three hawkish meetings, he has used the Q&A platform to help support the market by hinting that a possible "Dovish pivot" could occur depending on the data. Therefore, we believe the path of least resistance is lower for the time being for Precious Metals. If the trend flips back to bullish, we will inform our clients through our daily Tactical Insights report. Read More
The Metals, Money, and Markets Weekly: P is for Pain - Mickey Fulp
A hawkish Powell won't stop the Fed from pivoting in September - Invesco's Hooper
Gold prices still have a path higher even if Federal Reserve Chair Jerome Powell sends hawkish messages to the markets in his much-anticipated speech Friday during the annual central bank symposium at Jackson Hole, according to one market strategist.
In an interview with Kitco News, Kristina Hooper, chief investment strategist at Invesco, said that there is no reason why investors should not expect Powell to signal that the central bank will maintain its aggressive monetary policy stance.
"The Federal Reserve has been successful in managing inflation expectations, so there is no reason to change the formula now," she said. "We're going to hear very, very hawkish rhetoric from Jay Powell."
However, Hooper reiterated that "talk is cheap," and a hawkish stance in August doesn't preclude the central bank from pivoting on interest rates at the next monetary policy decision on Sept. 21.
"The next meeting is a lifetime away. We will get a lot of data between now and then and it's clear that the Fed is already impacting aggregate demand," she said.
There is significant uncertainty surrounding the U.S. central bank's next move. Markets see a 50/50 chance the Federal Reserve raises the Fed Funds rate by either 50 or 75 basis points. Hooper said that she expects the central bank to raise interest rates by 50 basis points, which would signal a pivot in its monetary policy stance.
According to the CME FedWatch Tool, markets see interest rates potentially ending the year between 3.75% and 4.00%. However, Hooper added that she sees interest rates rising to only 3% or even lower by year-end. Read More
Gold prices back near session lows as Powell strikes hawkish tone, saying the central bank will maintain restrictive policy stance for some time
Gold prices have fallen to session lows as Federal Reserve Chair Jerome Powell strikes an expected hawkish tone in his much-anticipated speech at Jackson Hole, Wyoming.
In his speech, Powell reiterated that inflation remains the biggest threat to the economy and the central bank is committed to bringing consumer prices back down to its target of 2%.
"Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy," he said in his remarks during the central bank symposium.
The gold market continues to hold support above $1,750 an ounce; however, it is struggling to attract new bullish momentum as markets expect to see further rate hikes.
Powell noted that rising interest rates continue to slow growth; he added that those risks are outweighed by inflation.
"While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain," he said. "Without price stability, the economy does not work for anyone." Read More
Mixed sentiment shows gold going nowhere next week as price hovers around $1,750
The gold market is once again stuck in relatively neutral territory, holding support around $1,750 and mixed sentiment among Wall Street analysts and Main Street investors does not point to any kind of break out next week.
Gold continues to struggle to attract any bullish attention as the Federal Reserve maintains its aggressive monetary policy stance. Analysts note that gold faces further headwinds following comments from Fed Chair Jerome Powell in his much-anticipated speech at the central bank symposium at Jackson Hole, Wyoming.
Although Powell wasn't as hawkish as some analysts were expecting, he noted that rates still need to go higher as inflation remains the biggest threat to the economy. He added that interest rates could stay higher for longer to ensure inflation remains close to the central bank's 2% target.
Phillip Streible, chief market strategist at Blue Line Futures, said it could be difficult for the gold to rally as interest rates remain elevated.
"I'm not very optimistic on precious metals right now as the price hovers at these key support levels," he said.
However, other analysts have said that falling inflation pressures could prompt markets to price in less aggressive moves from the Federal Reserve, which would weaken the U.S. dollar and support gold prices.
Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures Index (PCE) increased 4.6% in July, down from June's annual increase of 4.8%.
"The inflation data was probably a lot more relevant than anything Powell said," said Adam Button, chief currency strategist at Forexlive.com. "Gold should do well as inflation continues to come down. The market is priced way too high for a 75-basis point move in September and gold should rally as those expectations start to come down."
The CME FedWatch Tool shows that markets are roughly split 50/50 on whether the Federal Reserve will raise the Fed Funds rate by 50 or 75 basis points next month. Read More
Chairman Powell delivers a fire and brimstone speech at Jackson Hole
Chairman Powell delivered a resolute keynote speech at this year’s Jackson Hole Economic Symposium this morning that shook the financial markets to their core. In essence, his message underscored that the Federal Reserve will continue its hawkish monetary policy and keep raising interest rates in its fight against the spiralling level of inflation. Although inflation had a modest decline from 9.1% to 8.5% last month it is still at a 40-year high.
The Chairman put to rest any belief that the Fed would reverse its current course of strong and concurrent rate hikes at each FOMC meeting for an extended period of time.
In his speech, he said, “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.”
He reinforced the Federal Reserve’s commitment to attempt to restore inflation to its 2% target saying that the central bank’s “overarching focus right now”. Although he went to his go-to playbook which is to be noncommittal in terms of specifics of how large the next rate hike will be at the September FOMC meeting he did not mince his words when he said that another “unusually” large increase in the benchmark lending rate could be appropriate when officials gather next month.
According to the CME’s FedWatch tool, there is a 60.5% probability that fed funds rates will move to 300 to 325 basis points at the next FOMC meeting. This would mean that the Federal Reserve will have raised rates by 75 basis points over the three consecutive Federal Open Market Committee meetings.
He also put to rest that the Federal Reserve will be able to effectively reduce inflation without an economic “hard landing” and recession by its knowledge and that restoring inflation to a 2% target will cause consumers and businesses to feel economic pain.
He said that restoring price stability will require a sustained period of below-trend growth and a weaker labour market. He acknowledged that the future actions of the Federal Reserve will bring some pain to households as well as businesses. Read More
Should markets listen to a hawkish Powell or just watch the data?
The gold market is once again stuck in neutral, trying to hold support around $1,750 an ounce even as interest rates continue to march higher.
Investors and traders are trying to digest the latest comments from Federal Reserve Chair Jerome Powell. In his short speech at the annual central bank symposium at Jackson Hole, Wyoming, Powell managed to sound hawkish without actually saying anything new.
With no real monetary policy guidance, market expectations are stuck at a 50/50 chance that the U.S. central bank will raise interest rates by 50 or 75 basis points next month. This uncertainty means that gold prices are probably stuck at $1,750 an ounce.
Of course, many economists were already dismissing Powell's outlook even before he started talking. In an interview with Kitco News, Kristina Hooper, chief investment officer at Invesco, pointed out that there is a lot of data between now and the next monetary policy decision on Sept. 21. She noted that the next meeting is a "lifetime away."
So, if everyone is focusing on Powell's comments, we could be missing an essential piece of the puzzle. The U.S. central bank has been clear that it will be watching the data to determine its next move, so let's look at the data. Read More
Gold price tumbles after Powell, $1,600 a risk for next week – analysts
After dropping nearly $25 following the highly anticipated speech by Federal Reserve Chair Jerome Powell, gold could be at risk of falling to $1,600 an ounce unless buyers step in to buy the dip, according to analysts.
Gold is ending the week down 0.8%, with December Comex gold futures last trading at $1,748, down 1.32% on the day.
A pivot from the Federal Reserve is not coming, and interest rates will remain elevated for longer than markets expect, said Federal Reserve Chair Jerome Powell at the Jackson Hole symposium.
"Restoring price stability will likely require maintaining a restrictive policy stance for some time," Powell said Friday. "The historical record cautions strongly against prematurely loosening policy."
Powell also did not rule out another 75-basis-point hike at the upcoming September meeting, reiterating that a lot will depend on the macro data released in the next three weeks.
"Another unusually large increase could be appropriate at our next meeting," Powell said. "Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook."
The Fed chair wants to avoid the mistakes of the 1970s, which is why he plans to act aggressively now. "The successful Volcker disinflation in the early 1980s followed multiple failed attempts to lower inflation over the previous 15 years. A lengthy period of very restrictive monetary policy was ultimately needed to stem the high inflation," Powell noted. "Our aim is to avoid that outcome by acting with resolve now."
There was weakness across the precious metals sector because of Powell's wording, RJO Futures senior markets strategist Peter Mooses told Kitco News Friday. "Gold was down after Powell said the Fed will continue to do what it can. It seems they will do what's necessary to fight inflation," Mooses said. Read More
The Fed has never hiked rates during a recession, expect stock markets to fall another 50% – Todd ‘Bubba’ Horwitz
The Federal Reserve has no room to pivot and reduce rates, and this is why they are raising rates during this recession, said Todd ‘Bubba’ Horwitz, Chief Strategist at BubbaTrading.com.
First and second quarter U.S. real GDP in 2022 were negative. This indicates a technical recession, which is two consecutive quarters of GDP decline.
“[The Fed] is raising rates during a recession,” said Horwitz. “It’s never been done in history… There is a political agenda behind all of this stuff that’s going on, which is to try to create The Great Reset.”
The Great Reset is a World Economic Forum plan to implement stakeholder-based governance and green energy infrastructure. Opponents of the Great Reset claim that it is a guise to transfer assets from the middle class to the wealthy.
“The [Biden] administration is looking to get the Great Reset,” said Horwitz. “There is going to be no middle class left.”
Horwitz spoke with David Lin, Anchor and Producer at Kitco News. Read More
Gold and silver move lower heading into the European open
Following the hawkish rhetoric last week from Powell gold has started this week on the back foot. The yellow metal is 0.79% lower at the start of the session. Silver is also struggling and trades 1.65% lower at $18.57/oz. Elsewhere in the commodities complex, copper (-2.74%) has also dropped but spot WTI is 0.46% in the black.
Indices have taken a slide in the Asia Pac area as the Nikkei 225 (-2.66%) and ASX (-1.95%) struggled but the Shanghai Composite rose 0.05%. Futures in Europe are projecting a negative cash open.
In FX markets, the dollar index pushed higher again. The biggest causality was the Japanese Yen as USD/JPY rose 0.75% overnight. In the crypto space, BTC/USD trades at $19,829.
News from the weekend and overnight: 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.
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