Today's Gold and Silver News - 5th September

Image Source: Unsplash

Gold Holding Near $1,700 Shows Support Remains Despite Rate Hike Pressure

Gold has climbed back above the key threshold of $1,700 an ounce as global bonds slipped into their first bear market in a generation.

The strength of the US dollar, which is trading near its record high, allied to the prospect of a sustained period of interest rate rises globally had pushed gold below $1,700 but the weakness of bonds has given gold a slight lift as investors seek alternative haven assets.

Today’s trading focus will be aimed at the upcoming US jobs data, which is expected to paint another healthy payrolls picture and follows on from a positive US manufacturing report. However, where previously these data would have been viewed as reasons why the Federal Reserve may not need to be as aggressive with its monetary policy for as long, the recent Jackson Hole meeting has brought a stark reappraisal that large interest rate rises are here to stay for the foreseeable future, with another 75 basis point increase expected later this month.

As such, while traders will undoubtedly keep a close eye on the US payrolls figure, the market reaction for gold is likely to be muted. The fact that gold has once again climbed back above $1,700 an ounce shows there remains support for the precious metal as it mirrors a similar move when gold plunged in July. 

Yet while there is clearly support for gold around $1,700 an ounce, it is hard to see the metal making any further gains given how hawkish the Fed and other central banks around the world now are as they seek to curb inflation.

Source: Kinesis

Silver Slides Below $18 to Lowest in Two Years on Strong Dollar and Hawkish Central Banks

Silver’s slide below $18 an ounce to levels not seen in more than two years has dashed hopes that the bottom recorded in July would prove to be the low for the year. 

A strong dollar, which is trading near record highs, allied by a Federal Reserve intent on raising interest rates multiple times over the coming months has forced silver down and drained away optimism that built up in August as the metal consistently held above $20 an ounce. 

Today’s payroll figures out of the US are likely to reaffirm that the world’s largest economy remains healthy and that high inflation isn’t yet having a material impact on employment nor manufacturing output. While this is a positive for silver, given its industrial use in sectors including solar energy and electric vehicles, for now this is overwhelmed by the actions central banks across the world are taking to bring double-digit inflation back under control.

It is worth noting that silver futures have now sunk significantly below where the metal can be bought in person, with the physical market at a premium to the paper one. This underlines both how far silver has fallen as well as demonstrating that the fundamental supply and demand outlook is not being matched by the price action on the financial markets, presenting a buying opportunity for a brave investor.

Source: Kinesis

Gold price sees little bullish conviction, retail investors bearish as market struggles around $1,700

The gold market hovers in a precarious position and support at $1,700 could be tested next week as there is little bullish conviction in the marketplace, according to the latest Kitco News Weekly Gold Survey.

Wall Street remains slightly bullish in the near term as the U.S. dollar remains overvalued; however, bearish sentiment among retail investors has risen to a multi-year high.

The bearish sentiment comes as the U.S. dollar looks to end the week at a fresh 20-year high above 109 points.

Darin Newsom, president of Darin Newsom Analysis, said that he remains optimistic that the gold market could attract some bargain hunting and bounce off support around $1,700 next week; however, he added the midterm and long-term outlooks look bleak.

"The U.S. dollar is too high and some profit taking could support gold in the near-term," he said. "But you can't ignore the fact that investors still want to own U.S. dollars because they see it as the safest current and asset out there."

Newsom added that despite rising daily volatility in the gold market, broader trends remain in place.

"Ultimately, gold is stuck. Until we see something destabilize this U.S. dollar rally, gold investors will remain mostly on the sidelines," he said.

This week, a total of 17 market professionals took part in Kitco News' Wall Street survey. Seven analysts, or 41%, said they were bullish on gold next week. Six analysts, or 35%%, said they were bearish. Four analysts, or 24%, said they were neutral on the precious metal. Read More

Dark clouds for equities in Sept. may be silver lining for gold, silver bulls

Since 1950, the S&P 500 has averaged a loss of 0.5% in September, including a drop of 11.9% in 1974. The benchmark index has also posted September losses in the last two years, dropping 4.8% in 2021 and 3.9% in 2020. This historically weak performance for the month, along with August’s declines and expectations of even higher rates from the Federal Reserve and other central banks, raise concern over a potential retest of the mid-June lows” in the stock indexes.

The above scenario may be what puts in price bottoms for the gold and silver markets. Gold hit a six-week low Thursday and silver a more-than-two-year low.

The metals markets (hard assets) and the stock market (paper assets) compete for trader and investor monies, and the turbulent months of September and October for the stock and financial markets may be just what the doctor ordered for the safe-haven gold and silver markets.

It can also be argued that the hawkish central banks and notions of weaker global economic growth that are likely to crimp consumer and commercial demand for metals, has now been factored into gold and silver prices.

Don’t be surprised if a “sell the rumour, buy the fact” scenario develops in the gold and silver markets in the near term, regarding the bearish central bank element for the metals.

Also, from a short-term technical perspective, the gold and silver markets are oversold, technically, and due for corrective bounces very soon. Read More

The Metals, Money, and Markets Weekly For Sept 2, 2022 -- E Is For Europe's Crisis

Listen to the podcast

Don't rule out a long weekend gold price surprise – analysts

Despite gold's $20 relief rally following the U.S. jobs report, analysts remain cautious, citing negative macro drivers and dangerous technical levels that could take the precious metal lower next week.

A strong U.S. dollar and rising yields forced gold below $1,700 an ounce earlier this week.

"Gold is becoming a punching bag as surging Treasury yields have rejuvenated the king dollar trade. It has just been bad news everywhere for gold. No reprieve in sight for gold until the move higher with global bond yields is over," said OANDA senior market analyst Edward Moya.

December Comex gold is looking to close Friday at around $1,727.20 an ounce, down 2.5% on the week, following a rally on the back of August's jobs report. 

But analysts see Friday's move only as a short covering rally. "The market has been trending lower. We failed to hold levels above $1,800. The $1,700 level is the bottom. I would expect the market to be choppy-range bound. And until we can get above $1,745 on a closing basis, I will remain neutral. Above that, I start to get positive," RJO Futures senior market strategist Frank Cholly told Kitco News. Read More

The Fed is ready to ‘inflict pain’ on economy to bring inflation down; stocks, Bitcoin to see more downside - Alfonso Peccatiello

The Fed will ‘inflict pain’ to get inflation down to 2 percent, said Alfonso Peccatiello, Author of The Macro Compass. The central bank’s resulting policy will adversely affect stocks and cryptocurrencies.

In his August 26th speech at Jackson Hole, Federal Reserve Chairman Jerome Powell adopted a hawkish tone, saying that reducing inflation will “bring pain to households and businesses.”

“Those are pretty strong words for a policymaker,” said Peccatiello. “What he means is that the Fed will not stop until the job is done. The job means that inflation goes back to 2 percent.”

Peccatiello added the effect of the Fed’s policy on “risk assets” like stocks and crypto could be dire.

“[The Fed] has to keep their monetary policy tight,” he said. “When real yields are high, every investment you are making becomes, from an evaluation perspective, less attractive.”

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

Gold – Technical Outlook: is $1680 a technical line in the sand for gold?

Image Source: Kitco News

The chart above is a monthly chart of gold futures. The horizontal red line is fixed at $1680 per ounce. In December 2012 gold futures opened at $1770 traded to a low of $1635 and then settled at $1671. This would be the last time that gold was valued above $1700 until April 2020. Gold prices would drift lower until December 2015 when gold hit a low of $1046. This would also mark the beginning of a multiyear rally in which gold moved from approximately $1000 at the beginning of 2016 to its current record high of $2088 in August 2020.

Image Source: Kitco News

The chart above is a weekly chart of gold futures. This chart contains a dashed red line which is fixed at $1700 per ounce, a solid black line at $1680, and letters A through D that represent four time periods where gold traded to a low of $1680 and recovered.

In April 2020 gold broke and closed above $1680 and then $1700 for the first time since December 2012, this week is marked with a rectangular box. This would be followed by a 10-week price consolidation (“A”). During these 10 weeks, gold would test the lows of $1680 twice and on each occasion close above that price point. Although the low at $1680 became an effective support level gold pricing was unable to break above $1800. This would be the first instance after gold moved back above $1700 when $1680 became a key support level.

In March 2021 marked “B” on the weekly chart, gold would trade to a low of $1680 in two instances. On both occasions, gold closed above $1700 during that week after testing $1680. This takes us to the flash crash that occurred in August 2021 marked “C” on the chart above. The last occurrence of gold testing $1680 as a support level occurred in July 2022 and like the occurrence in March and August of 2021 gold would trade to a low of $1680 but close above $1700. 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.