Today's Gold and Silver News - 4th August

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Gold Holds Near $1,760 as Haven Demand From US-China Tensions Offset by Hawkish Fed

Gold is trading around $1,760 an ounce as it finds itself being pulled by two contrasting factors.

The visit of US House Speaker Nancy Pelosi to Taiwan has increased political tensions between China and the US with China increasing military operations in the area in response and increasing demand for safe-haven assets such as gold as a result.

However, gold’s potential gains from this deteriorating political outlook is offset by the latest comments from Federal Reserve officials that point to further large interest rate hikes with Charles Evans forecasting an increase of 50 to 75 basis points in September. In this environment of ever-rising interest rates, gold’s appeal diminishes due to its lack of yield.

While Fed officials have been speaking about future rate hikes, tomorrow is set to bring another actual interest rate increase with the Bank of England expected to raise its benchmark rate by 50 basis points. 

Historically, even during the depth of Donald Trump’s US Presidency when US-China relations were historically low amid a trade war, the situation has ultimately resolved itself in a harmony of sorts. So while Pelosi’s Taiwan trip is causing a short-term increase in tensions, when this stern rhetoric and military show of strength fades, market focus will return to interest rates and the negative long-term impact that is likely to have on gold. Read More

Silver Slips Below $20 on Prospect of Further Large Hikes Needed by Federal Reserve

Silver has slipped below $20 an ounce as recent comments by senior Federal Reserve officials pointed towards further large interest rate hikes needed to tame inflation, forcing a reassessment of the snap reaction to the Fed’s July interest rate decision that was deemed to suggest a less aggressive path. 

The psychological aspect of trading, which is more important to silver than gold given its popularity among retail investors and smaller overall market size, means that silver investors will want to see the precious metal’s price quickly climb back above the key threshold of $20 an ounce to ensure the tentative return of interest in silver doesn’t immediately evaporate. 

Silver hasn’t benefited from the increased demand for safe-haven assets following an escalation in political tensions between the US and China in the wake of House Speaker Nancy Pelosi’s visit to Taiwan. This is an illustration of the tough time silver has had in 2022 where it has felt the full weight of any negative macro driver, such as rising interest rates, but hasn’t received the equivalent boost from potentially positive drivers such as rising inflation or safe haven demand. 

That said, silver’s moves in late July pointed to a market that had finally found its bottom after a brutal few months so today’s dip can be interpreted as a backward step on an otherwise upward trajectory given the strong fundamental outlook for the metal. Read More

Gold prices remains under pressure, ignores jump in U.S. ISM Service-Sector PMI to 56.7

The gold market continues to see solid technical selling pressure but has largely ignored stronger than expected activity in the U.S. service sector, according to the latest report from the Institute for Supply Management (ISM).

Wednesday, the ISM said that its service-sector index showed a reading of 56.7% for July, up from June’s reading of 55.3%. The data beat expectations, as consensus forecasts called for a drop to 53.5%.

Readings above 50% in such diffusion indexes are seen as a sign of economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.

“Growth continues — at a faster rate — for the services sector, which has expanded for all but two of the last 150 months. The slight increase in services sector growth was due to an increase in business activity and new orders,” said Anthony Nieves, Chair of theism Services Business Survey Committee.

The gold market is not seeing much movement in reaction to the latest economic data. December gold futures last traded at $1,776.80 an ounce, down 0.72% on the day.

Looking at the components of the report, The Business Activity Index jumped to 59.9%, up from June’s reading of 56%. The New Orders Index rose to 59.9%, compared to the June reading of 55.6 percent. Read More

Gold, silver pressured at mid-week by higher USDX, bond yields, lower oil

Gold and silver prices are lower at midday Wednesday. Rising U.S. Treasury yields, a firmer U.S. dollar index and lower crude oil prices at mid-week are squelching buying interest in the precious metals. An uptick in trader/investor risk appetite today is also bearish for the safe-haven metals. October gold futures were last down $14.50 at $1,765.30. September Comex silver futures were last down $0.234 at $19.905 an ounce.

Global stock markets were steady to weaker overnight. U.S. stock indexes are solidly higher at midday. Trader and investor anxiety has somewhat receded as U.S. House Speaker Nancy Pelosi visited Taiwan Tuesday evening without incident—at least not yet. China has vowed retaliation over her visit and plans on conducting a large-scale military exercise around Taiwan.

U.S. Treasury yields have up-ticked this week as U.S. Federal Reserve officials this week reiterated they plan to keep raising U.S. interest rates to choke off problematic price inflation. The yield on the 10-year U.S. Treasury note is fetching around 2.75%.

Technically, October gold futures bears have the overall near-term technical advantage. However, a fledgling price uptrend is still in place on the daily bar chart to suggest a market bottom is in place. Bulls’ next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,720.00. First resistance is seen at today’s high of $1,779.10 and then at this week’s high of $1,794.80. First support is seen at today’s low of $1,759.70 and then at $1,750.00. Wyckoff's Market Rating: 3.0.

Image Source: Kitco News

September silver futures bears have the overall near-term technical advantage. However, a price downtrend has been negated to suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at $21.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at this week’s high of $20.51 and then at $20.75. Next support is seen at today’s low of $17.75 and then at $19.40. Wyckoff's Market Rating: 3.0. Read More

Image Source: Kitco News

A 'prolonged' and 'engineered' recession with 6-7% unemployment could be near: Here is how to prepare - Lyn Alden and Alfonso Peccatiello

 Whether or not the U.S. is in a recession has become a polarizing topic. According to Commerce Department figures, the U.S. economy has had two-quarters of GDP decline, which fits the traditional definition of a recession.

Yet Fed Chairman Jerome Powell said last week that the U.S. is not in a recession, a view shared by Treasury Secretary Janet Yellen and White House economist Brian Deese. Powell, for example, cited a strong labour market as a reason why the U.S. is not in recession territory.

However, we are in a "technical recession," said Alfonso Peccatiello, Author of The Macro Compass blog. Lyn Alden, Founder of Lyn Alden Investment Strategy, agreed with Peccatiello.

"So far, it's a mild recession," said Alden. "I think the labor market is weaker than it looks like… Wages went up significantly in the past year, but they went up significantly less than inflation. So, the average worker got a pay cut over the past year at a much deeper rate than is normal. It is one of the worst years ever for inflation-adjusted wage growth."

Alden and Peccatiello spoke with David Lin, Anchor and Producer at Kitco News. Read More

Gold price to drop to $1,650 by year-end but a revival is coming in 2023, says Capital Economics

Despite this week's gains, gold is still likely to drop to $1,650 by the year-end before staging a recovery, according to the latest forecast from Capital Economics.

"Having fallen sharply in Q2, we think that the gold price is now close to a cyclical trough. What's more, the price should revive a little in 2023 as markets factor in the prospect of U.S. monetary tightening," said Capital Economics chief commodities economist Caroline Bain.

Since reaching a peak in March when gold traded above $2,000 an ounce, the precious metal has been on the retreat, falling around 11%. The slide has been driven by a stronger U.S. dollar and the Federal Reserve's aggressive fight against inflation via its oversized interest rate hikes.

"The price of gold has dropped by 11% since its recent peak in March. Much of the fall can be placed firmly at the feet of dollar appreciation. After all, the price of gold in other major currencies has held up much better. Rising U.S. real Treasury yields also played a part," Bain said Wednesday.

This week, gold has stabilized after falling to $1,700 an ounce, with prices even attempting to climb back to $1,800. At the time of writing, December Comex gold futures were at $1,781.90, down 0.44% on the day.

"Slower economic growth and a slump in non-energy commodities prices point to less monetary tightening in the U.S. than investors had been anticipating. In recent weeks, 10-year yields have fallen, U.S. equities have picked up, and the dollar has eased back," Bain pointed out. Read More

Gold trades higher ahead of the European open

Gold (0.37%) and silver (0.03%) are trading higher ahead of the European open. Elsewhere in the commodities complex, copper is 1.15% lower and spot WTI is 0.10% lower so far. 

Risk sentiment overnight was pretty good. The Nikkei 225 (0.69%) and Shanghai Composite (0.73%) both pushed higher but the ASX (-0.01%) struggled. Futures markets are indicating a positive cash open in Europe. 

In FX markets the biggest mover was NZD/USD which rose 0.29%. In the crypto space, BTC/USD is 0.37% higher at $22,893.

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.