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As gold price eyes $2,000 again, its 'big test' is yet to come, says MKS
Hotter-than-expected inflation data kept gold in demand as prices breached the $1,980 an ounce level. But, the precious metal's "big test" is yet to come, according to MKS PAMP Group.
Markets are digesting inflation accelerating to new four-decade highs in March after rising 8.5% from a year earlier. On top of that, the U.S. Producer Price Index (PPI) advanced 11.2% from a year ago in March, posting another new record.
Many economists are projecting for March figures to mark a peak in inflation, citing decelerating core inflation, base effects, and some easing in supply chain issues.
Yet the gold market is still rising, unafraid of an aggressive Federal Reserve. June Comex gold futures advanced to $1,981.00 Wednesday, up 0.25% on the day.
"If this really is 'peak inflation' coupled with impending back-to-back 50bp Fed hikes, gold should be trading very defensively… it is not. Prices are up $30 since the CPI print as it harnesses the oversimplified view that 'high inflation prints = higher gold' program instead of the 'high inflation = hawkish Fed = lower gold' one," said MKS PAMP Group metals strategist Nicky Shiels. Read More
U.S. labor market remains volatile as weekly jobless claims rise by 18k
Momentum in the U.S. labor market remains relatively volatile as more workers than expected applied for first-time unemployment claims last week.
Thursday, the U.S. Labor Department said that weekly jobless claims rose by 18,000 to 185,000, up from the previous week's revised estimate of 167,,000 claims.
The latest labor market data missed expectations. According to consensus forecasts, economists were expecting to see jobless claims to rise to 172,000. Despite the rise, weekly jobless claims have been in a steady downtrend since the start of the year.
The gold market is not seeing much reaction to the latest labor market data as the precious metal is seeing some technical selling pressure early in the North America session. Spot gold last traded at $1,972 an ounce, down 0.27% on the day. Read More
ECB in no hurry to raise rates even as inflation risks rise
Inflation pressures have risen, but the European Central Bank is reluctant to increase the speed of its normalization process.
Following its monetary policy meeting, ECB President Christine Lagarde struck a firm tone that the central bank will maintain a level of flexibility as Russia's invasion of Ukraine has significantly impacted the region's economic activity.
"Flexibility has served us well in the last two years," she said. "We have a sequence that we will continue to follow."
The comments come as the ECB left interest rates unchanged and reiterated its plan to end its asset purchase program sometime in the third quarter.
The comments come as Europe continues to feel the effects of Russia's war with Ukraine.
"The conflict and the associated uncertainty are weighing heavily on the confidence of businesses and consumers. Trade disruptions are leading to new shortages of materials and inputs. Surging energy and commodity prices are reducing demand and holding back production. How the economy develops will crucially depend on how the conflict evolves, on the impact of current sanctions and on possible further measures," Lagarde said in her open statement. "In the current conditions of high uncertainty, we will maintain optionality, gradualism and flexibility in the conduct of monetary policy." Read More
The Metals, Money, and Markets Weekly: Is This Dr. Jekyll or Mr. Hyde
Gold, silver pressured by strong U.S. dollar, rising bond yields
Gold and silver prices are lower in midday U.S. trading Thursday, on downside corrections following recent good gains. A higher U.S. dollar index that hit a two-year high and rising U.S. Treasury yields that this week hit three-year highs are bearish elements that worked against the precious metals market bulls on this day. June gold futures were last down $10.50 at $1,974.20 and May Comex silver was last down $0.425 at $25.605 an ounce.
Image Source: Kitco News
Technically, the June gold futures bulls have a firm overall near-term technical advantage. Bulls' next upside price objective is to produce a close in April futures above major resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,915.00. First resistance is seen at this week's high of $1,985.80 and then at $2,000.00. First support is seen at Wednesday's low of $1,966.30 and then at $1,950.00. Wyckoff's Market Rating: 7.0. Read More
Volatility to dominate gold market as 'central banks running out of options,' bullish sentiment intact - Kitco's gold price survey
Despite a $20 retreat prior to the long weekend, the bullish sentiment continues to dominate the gold market with volatility keeping investors watching the $2,000 an ounce level again, according to Kitco's gold price survey.
During the short trading week, gold was able to breach a key resistance level of $1,975 an ounce, with June Comex gold futures touching a high of $1,985 on Wednesday. And even though prices saw a drop Thursday, gold futures are ending the week up 1.2%.
Most of the 13 participating analysts on the Wall Street side were bullish when asked about their gold price expectations for next week, with 46% projecting higher levels. Another 31% were bearish, estimating a bigger pullback. And the remaining 23% were neutral.
The Main Street side was even more decisively bullish. Out of the 1,254 participating retail investors, 72% expect higher prices, 16% estimate a move lower, and 12% are neutral, Kitco's survey showed. This was the highest retail participation since November 19. Read More
U.S. dollar is gold's main obstacle in breaching $2k – analysts
Gold tested a critical level this week on its way to $2,000, but one of its main obstacles remains a strong U.S. dollar, according to analysts.
Despite a selloff during the week's last trading day, gold is still up 1.5%, with June Comex gold futures last trading at $1,974.6 after rising above $1,985 an ounce a day earlier.
After seeing renewed safe-haven appeal amid significant geopolitical tensions, the U.S. dollar is limiting gold's upside. The U.S. dollar index breached the key psychological level of 100 Thursday, last trading at 100.36.
"Gold is receiving strong haven demand. But we see the same thing with the U.S. dollar. That will be a potential headwind for gold. The USD is being viewed as the 'cleanest dirty shirt in the laundry.' Investors are looking for safety outside of some of the chaos and uncertainty that we see in the markets. The argument is similar to gold — it is viewed as a trusted place," Gainesville Coins precious metals expert Everett Millman told Kitco News. Read More
Global inflation concerns result in aggressive action by central banks
Inflation is not limited to the United States. It is a global phenomenon prompting central banks worldwide to take action. Central banks worldwide are quickly moving to a more aggressive monetary policy in an attempt to stave off the spiraling international level of inflation. The president of the Federal Reserve Bank of New York, John Williams, spoke to Bloomberg Television saying that ½ a percent hike in interest rates is a 'very reasonable option' for May.
He also addressed the endgame and timeline to achieve interest rate normalization, saying, "We need to get to a more neutral or normal level of the fed funds rate, though whether that would be the end of the year or exactly when will depend on the data … The Fed should get "real" interest rates -- nominal borrowing costs minus expected the inflation rate -- back up to a more normal level by next year." 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.
