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Gold Holds Above $1,800 Reflecting Support Remains in Jittery Market Climate
Gold starts a new week holding above $1,800 an ounce after dipping below that key psychological threshold at the end of last week.
With the US celebrating Independence Day, today’s trading volumes are likely to be more muted. The initial signs are for European indices to be making tentative gains with gold experiencing small losses with the typical inverse relationship between these two asset classes returning for today at least.
Gold’s principal short-term headwind is the strengthening US dollar, which puts downward pressure on all the commodities priced in that currency, including gold.
The dollar’s strength is coming from the Federal Reserve’s aggressive switch in monetary policy with another large interest rate hike expected at the end of this month. Clarity on the Fed’s position will come later this week with the release of the minutes of the Federal Open Market Committee.
In this environment of ever-rising interest rates, it is hard to see gold making significant gains but if the precious metal can hold above $1,800 an ounce, then it would demonstrate that there remains significant underlying support for gold.
Which given the ongoing jitters with market confidence amid fears of a recession as well as a war in Ukraine, is entirely understandable. Read More
Silver’s Struggles Continue as Strong Dollar Pushes Price Down to 2-Year Lows
Silver’s struggles are showing no sign of easing any time soon with the metal trading below $20 an ounce, near its lowest level in two years.
The implementation of interest rate hikes by central banks on both sides of the Atlantic as well as the prospect of more increases to come have been the key factor in silver’s slide from close to $26 an ounce down to below $20 in the space of two and a half months.
Today is likely to see reduced market activity with the US holiday for Independence Day. However a note of caution is that sometimes these reduced volumes can lead to disproportionately volatile price action with silver an asset that can be particularly prone to these outsized moves.
The strengthening of the US dollar in the light of the Federal Reserve’s adoption of hawkish monetary policy is the latest factor piling pressure on silver and it is difficult to point to any short-term factor to provide silver investors with cause for optimism. Over the course of the last few months, silver has failed to rally on any support but surely with the metal now at 2-year lows that floor must soon be arriving?
As soon as that bottom is finally reached, the medium-term outlook is far more promising for silver so for a brave investor these low current price levels represent good long-term value. Read More
Fed to err on the side of too many rate hikes: Why is gold at $1,800?
Markets are anticipating the Federal Reserve to err on the side of tightening, with Chair Jerome Powell admitting this week that the real mistake would be failing to get inflation under control.
Recession fears and the hawkish Federal Reserve triggered bouts of volatility this year - the S&P 500 had its worst half of the year since 1970, while Bitcoin saw its largest quarterly drop in more than a decade. For gold, however, it has been steady sailing, with the precious metal down just 1% since the start of the year.
Analysts believe the precious metal has done a "spectacular job" of storing value. But many are neutral on the precious metal until more U.S. data show inflation peaking and growth slowing.
The headline keeping many investors cautious this week was Powell stating that the U.S. central bank could take things too far and potentially risk a recession for price stability.
"Is there a risk we will go too far? Certainly, there is a risk. But it's not the biggest risk to the economy. The bigger mistake to make would be to fail to restore price stability," Powell said during a policy panel at the ECB Forum on Central Banking in Sintra, Portugal.
At the time of writing, August Comex gold futures were trading at $1,808.50, roughly unchanged on the day.
Making gold harder to read were many investors rebalancing their portfolios for the second half of the year in light of rising recession calls, OANDA senior market analyst Edward Moya told Kitco News.
"There are some concerning calls from others that gold could be vulnerable to some further selling pressure here. That is if the dollar remains fairly supported," OANDA senior market analyst Edward Moya told Kitco News. "It is tough to assess the market's true views. We are seeing significant repositioning. But the outlook for gold should still be fairly sideways. Next week, there will be a lot of focus on whether or not we see any signs that Fed members are becoming more optimistic that inflation is cooling." Read More
U.S. dollar weakens against euro, sterling in U.S. holiday trading
The euro and sterling rose on Monday against the dollar in a quiet trading session amid a holiday in the U.S., while global risk sentiment has improved.
With the U.S. markets closed for Independence Day, markets expected a light trading day, with major currencies gaining some ground against the U.S. dollar, which had climbed to a two-week high on Friday.
The euro rose 0.3% to $1.0457 but stayed barely above May's five-year trough of $1.0349. While sterling rose 0.5% to $1.2155 after hitting a two-week low of $1.1976 on Friday.
"Quiet trading to start the week is seeing the U.S. dollar weaken against most major currencies as it unwinds Friday’s gains while ignoring a modest risk-off tone in markets," said Shaun Osborne, chief FX strategist at Scotiabank.
Reports that the White House will announce an easing of some Chinese tariffs later this week in an attempt to dampen elevated inflation helped inject some optimism back into markets, "giving currencies an extra push against the U.S. dollar," Osborne added.
The Australian and New Zealand dollars, as well as the Swedish crown, rose on Monday after hitting two-year lows on Friday.
But amid fears of a global recession, the euro remained near a five-year low against the safe-haven dollar. Read More
The gold vs silver ratio hits a 2 year high
The gold/silver ratio has hit a 2 year high. Silver has been moving lower in recent sessions and has recently taken out significant support at $20.46/oz. Gold has also been looking subdued but the consolidation low is still holding. Silver often moves in a more volatile style vs the yellow metal but looking at the more economically tangible metals like aluminum, zinc, and copper have all taken moves lower recently. The gold vs copper ratio has also just moved higher and taken out 500.00 up 23% in the last 4 weeks.
Gold has been struggling to hold above $1800/oz in recent sessions but there is a hammer candle on the daily chart that suggests it could. Looking at the gold vs silver chart (weekly) below the price has broken out of a converging pattern (wedge). The top of the pattern could be a support zone and below that there is another support at the purple horizontal line.
On the topside, there is a bit of traffic coming up. The next is the orange area at 93.30. It is also the 50% Fibonacci retracement area from the swing high to the swing low. For now, the price is making higher highs and higher lows and gold is holding up better than silver. Read More
Gold and silver trade higher leading into the European open
Gold (0.07%) and silver (0.62%) are both trading above flat heading into the European open. In the rest of the commodities complex, copper (-0.52%) and spot WTI (-0.75%) both traded in the red.
Stock markets in the Asia Pac area were mixed overnight. The Nikkei 225 (1.03%) and ASX (0.25%) moved higher but the Shanghai Composite fell 0.16%. Futures in Europe are pointing to a positive cash open.
USD/JPY was the biggest mover in FX overnight climbing 0.35%. In the crypto space, BTC/USD is trading at $20,369.
News from overnight: Read More
In this week’s Live from the Vault, Andrew Maguire offers a long-term outlook on the implementation of the BRICS currency basket, with the US dollar’s reserve currency status under threat.
The precious metals expert speaks on the forthcoming unwinding of the derivatives market and forecasts a large-scale reevaluation of gold and silver.
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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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