Today's Gold and Silver News - 29th July

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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 price holding solid gains as U.S. GDP drops 0.9% in Q2

It might not be an official recession just yet, but the U.S. economy contracted for the second consecutive quarter.

Thursday, Commerce Department said in its advanced reading that U.S. Gross Domestic Product fell 0.9% in the second quarter, missing market estimates for a 0.4% increase.

“The decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by increases in exports and personal consumption expenditures,” the report said.

The decline in economic activity comes as the U.S. GDP contracted 1.6% in the first quarter.

The gold market is holding solid gains following the latest economic report. August gold futures last traded at $1,741.50 an ounce, up 1.32% on the day.

Officially the National Bureau of Economic Research (NBER) is the agency that would officially declare a recession, which usually happens after months of research and debate; however, the traditional definition is when an economy contracts for two consecutive quarters.

Analysts have said that a recession in the U.S. would be positive for gold as it could force the Federal Reserve to slow the pace of its rate hikes at a time when inflation remains persistently elevated.

However, not all economists expect the Federal Reserve to ease up on its aggressive rate hike stance.

Andrew Hunter, senior U.S. economist at Capital Economics, said that inflation remains a major issue that the U.S. central bank needs to address.

“Overall, the data confirm that underlying growth has slowed sharply, but with labour market conditions still holding up and inflation far too high, that won’t convince the Fed to dial back its tightening plans,” he said. Read More

Gold to be the standout metal for the rest of 2022 – Bloomberg Intelligence

Following another 75-basis-point hike from the Federal Reserve, gold looks to be the standout metal in the second half of the year, especially in light of lower industrial metals prices signalling deflationary forces coming back to the fore, according to Bloomberg Intelligence.

Following the Fed's July decision, gold jumped around $30, with August Comex gold futures last trading at $1,749.30, up 1.76% on the day. This comes after gold got stuck in consolidation mode following a sudden drop to the $1,700 an ounce level, which was led by a strong U.S. dollar.

"The 75-bp rate hike at the July meeting could solidify foundations for an elongated bull market in gold and U.S. Treasury bonds. Copper and gold are a bit too cold at the end of July, but we see greater industrial metal headwinds," Bloomberg Intelligence's senior commodity strategist Mike McGlone said in a report this week.

Bloomberg Intelligence sees gold as a potential standout in the second half of the year after delivering steady results in the first half of 2022. Year-to-date, gold is down 4.2%.

McGlone is not ruling out deflationary forces making a comeback following Fed's aggressive rate hikes.

"The Fed hiking rates in 2022 at about 3x the pace expected at the start of the year is a strong headwind for most assets, but it's the endgame that typically matters to bottom gold. We see plunging copper as a sign of a resumption of deflationary forces to buoy gold," he said.

In just 40 days, the Fed raised rates by 150 basis points. And that might be enough for gold to find its bottom and kick off the next rally.

"Gold and Treasury long bonds … may be top beneficiaries when tightening subsides. Rising rates typically buoy bond yields in the short term, but since the 75-bp hike on June 15, long-bond yields have declined," McGlone said. "Gold began to recover from about $1,200 an ounce around the time that bond yields peaked four years ago, and we see rising potential parallels at about $1,700. The metal is quite discounted to most moving averages in the midst of an elongated upward trajectory." Read More

Gold and silver are 'underpriced' going into summer's end – MKS

After vastly underperforming in the first half of the year due to aggressive Federal Reserve rate hikes, gold and silver look "underpriced" going into the second half of 2022, said MKS PAMP.

Both gold and silver defied seasonal patterns so far this year, with gold trading down 4.3% year-to-date and silver down 14.5% year-to-date.

"The severe seasonal under-performance was due to 1) recession fears crimping demand & China lockdowns (white metals) and 2) fears of Fed hikes driving a stronger US$ & higher real US rates trumping inflation/war risk (Gold)," said MKS PAMP head of metals strategy Nicky Shiels.

Historical trends point to precious metals as traditional winners until Labor Day. And going into that period, gold and silver are looking underpriced.

Several triggers could help precious metals turn things around. And that includes a slowdown in Fed rate hikes.

"If 1) markets start pricing in a Fed pivot (a Fed 'done' hiking by 2023), 2) risk improves with Russia/China COVID catalysts & risks less bearish into H2, 3) broader acceptance of low likelihood of a big recession and/or large credit event, 4) contrast of "max bearish" paper positioning in Precious with "max bullish" physical positioning (in Gold & Silver, not PGMs), —> then precious are rather underpriced heading into 2H," Shiels wrote in a report this week.

Gold could start pricing in a Fed pivot, especially after Fed Chair Jerome Powell said that the U.S. central bank might soon be ready to slow down its tightening. Powell told reporters on Wednesday that after the second 75-basis-point hike in a row, the U.S. monetary policy is now at neutral, which means that the Fed could soon start slowing its rate hike pace.

"Now that we're at neutral, as the process goes on, at some point, it will be appropriate to slow down. And we haven't made a decision when that point is, but intuitively that makes sense. We've been front-end loading these very large rate increases. Now we're getting closer to where we need to," he said. Read More

Gold price can build on its 2% rally after Fed’s 75 basis point move – SSGA’s Milling-Stanley

Financial markets, including gold, have breathed a collective sigh of relief after the Federal Reserve raised interest rates by 75 basis points. According to one market strategist, this could be an important turning point for the precious metal.

In an interview with Kitco New, George Milling-Stanley, chief market strategist at State Street Global Advisors, said that gold's recent drop below $1,700 was an exaggerated move and its push back above $1,750 is a closer representation of its fair value. He added that growing economic uncertainty and ongoing geopolitical turmoil will continue to support prices, especially as the Federal Reserve is closer to the end of its tightening cycle.

"I have been please that gold prices were able to hold support around $1,700 an ounce and I expect that the market will be able to build on the move that we are currently seeing," he said.

Milling-Stanley added that he is not surprised that gold prices have rallied 2% the day after the Federal Reserve's monetary policy decision. He noted that the U.S. central bank could have been a lot more hawkish; instead, Federal Reserve Chair Jerome Powell struck a solid tone that further aggressive rate hikes will be data-dependent.

Powell also said Wednesday that the central bank would be prepared to slow the pace of rate hikes as the economy reacts to its aggressive monetary policy.

"As of today, the markets have decided that there are another two months before the next meeting. And that is time for a lot of data to be released," he said. "The consensus seems to be in September, we will only be looking for a 50-basis point increase, and it may get lower in October. Markets are seeing the light at the end of the tunnel," he said.

Milling-Stanley added markets are now focusing more on the threat of a recession than Fed rate hikes, which could weaken the U.S. dollar and cap bond yields. At the same time, he added that even if the economy slows, it is unlikely the Federal Reserve will be able to bring inflation entirely under control.

"As people's fear of recessions resurface and I'm sure it will on multiple occasions over the next two months, then I think that gold will do well as investors seek safe-haven assets," he said. "I expect that growth will continue to slow. The U.S. economy is going to get a lot worse before it gets better than that is positive for gold." Read More

Silver surges 7.45%, gold gains 2.07%, and precious metals participants rejoice

While gold and silver traders are not dancing in the streets, they are quietly rejoicing. Their assumptions, knowledge, and expectations that both gold and silver have been oversold and undervalued were greatly rewarded today. Goods and service prices continue to become more costly and the fact that the Federal Reserve's four consecutive rate hikes have made only a fractional difference in "core" inflation is a strong confirmation that the Federal Reserve is ineffective in reducing inflation to its target level of 2%.

However, when it comes to "headline" inflation which adds the costs of energy, food, and shelter into the equation the net result of their monetary policy has had zero impact with inflation continuing to spiral to higher levels.

It is emphatically clear that the United States economy has met the definition of a recession regardless of what the government wants us to believe. Therefore today's extremely robust move in both gold and silver are highly warranted and long overdue.

Image Source: Kitco News

As of 5:15 PM, EDT August gold futures are currently up $34.30 which is a net gain of 2%. The December contract which will soon become the most active futures contract and is currently up $35.50 and fixed at $1773.30.

Image Source: Kitco News

However, it was silver that outshined the precious metals complex today rising by 7.45% with the September futures contract currently up $1.385 and fixed at $19.98.

Over the last month, our daily articles have assumed that gold prices were extremely undervalued and oversold. More so, we identified a key price point at $1680 which we believed had a realistic probability to define a major support level in which a key reversal could take place. Because of that assumption we made a recommendation to our premium subscribers on July 14 to enter an order to buy August gold at $1681 or better. On July 21 gold traded to a low of $1678.60 allowing our open order to be executed. Today we recommended closing the trade out and our effective exit price was just above $1745. Read More

Gold and silver trade higher ahead of the European open

Gold (0.49%) and silver (0.77%) are both trading higher leading into the European open. In the rest of the commodities complex, copper has moved 0.52% in the black while spot WTI has fallen 0.12%. 

Risk sentiment was mixed overnight. The Nikkei 225 (-0.05%) and Shanghai Composite (-0.95%) struggled while the ASX rose 0.81%. Futures in Europe are looking positive. 

In FX markets, the dollar index fell half a percent and the biggest mover was USD/JPY which fell 1.20%. In the crypto space, BTC/USD (1.22%) is trading at $24,133.

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.