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Gold Slumps to 2022 Low as Strength of Dollar Prompts Price To Sink Below $1,800
Gold is trading near to its lowest level of the year as the US dollar becoming the safe haven of choice at this time of economic uncertainty forced the price well below the key threshold of $1,800 an ounce.
In the early part of the year, the stars looked to be aligning for gold to have a stellar year. Inflation was rising, equity markets were falling and then in late February Russia invaded Ukraine. However, what looked on paper to be ideal conditions for a gold rally hasn’t lasted as despite an initial spike above $2,000 an ounce back in early March, the Federal Reserve’s switch to a more hawkish monetary policy has wiped off those gains.
The Fed’s series of aggressive interest rate hikes has seen the US dollar strengthen and made gold less attractive compared with other assets that produce a yield. While these interest rate moves draw the sting out of gold’s gains early in the year, the ongoing effect has been for the US dollar to keep strengthening versus other global currencies, pulling down the buying strength of assets priced in the greenback, including gold.
Where gold goes from here will be fascinating to see as having held above $1,800 for much of the year, the drop below this level raises questions about the amount of underlying support that remains for the precious metal. The initial signs are that gold is stabilizing around the $1,770 level so holders of gold will be hoping this represents the low for now but will be ever more fearful of what the Fed has in store with its interest rate decision at the end of this month. Read More
Silver Is Stuck Below $20 as Strength of Dollar Pours Fresh Pain on Unloved Metal
Silver remains below $20 an ounce at levels last seen two years ago.
The climate of ever-rising interest rates combined with concerns over the economic growth prospects that could see high inflation tip over into a recession have dealt silver two large blows.
The series of interest rate hikes implemented by the Federal Reserve and other major central banks, with Australia the latest hiker, has created an environment where non-yield paying assets such as silver are much less attractive. Added to this, the Fed’s aggression has seen the US dollar strengthen with its gains further boosted by the greenback becoming the haven asset of choice amid jittery market conditions, with gold seemingly having fallen out of favour.
While inflation on the face of it would be a boost for silver, this has been more than offset by the hawkish monetary policies adopted by central banks. The fear that these measures to tackle inflation will trigger a recession or stagflation has further hit market confidence with silver pulled down with its industrial exposure.
For now, silver just can’t find any support but as stated numerous times in these commentaries, the medium-term outlook remains bullish for silver, given it is a key component of two of the most important technologies of the energy transition, in solar energy and electric vehicles. As soon as its fortunes turn, silver could rally quickly but for now, it looks like there is more pain for holders to endure first. Read More
Price erosion continues in gold, silver as crude oil crumbles, greenback gains
Gold is under strong selling pressure and silver is modestly down in midday U.S. trading Wednesday. Gold hit an 8.5-month low and silver a two-year low today. The metals bulls continue to run for cover amid a stronger U.S. dollar index that hit a 20-year high today, and by crude oil prices that are down around $10 a barrel in just two trading days so far this week. The near-term technical charts for gold and silver are also fully bearish, which is prompting the chart-based traders to play the short sides of the futures markets. August gold futures were last down $25.00 at $1,739.50. September Comex silver futures were last down $0.141 at $18.98 an ounce.
Technically, August gold futures prices hit an 8.5-month low today. Bears have the solid overall near-term technical advantage and have momentum. Prices are in a four-month-old downtrend on the daily bar chart. 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 $1,700.00. First resistance is seen at $1,750.00 and then at today’s high of $1,771.50. First support is seen at $1,725.00 and then at $1,700.00. Wyckoff's Market Rating: 1.5.
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September silver futures prices hit another two-year low today. The silver bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the May low of $20.525 an ounce. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at today’s high of $19.325 and then at $19.85. Next support is seen at today’s low of $18.705 and then at $18.50. Wyckoff's Market Rating: 1.0. Read More
Image Source: Kitco News
U.S. Mint gold bullion sales drop 76% in June year-over-year; silver bullion demand down 69%
Gold prices have dropped dramatically this week, testing long-term support at around $1,730 an ounce, but according to some analysts, lower prices could help reset the physical bullion market and bring in new retail investors.
Sentiment in the gold market was fairly bullish last month as investors saw the precious metal as an important inflation hedge and safe-haven asset as recession fears have started to grow. However, that bullish sentiment wasn't seen in the physical bullion space as sales dropped sharply last month.
According to sales data from the U.S. Mint, it sold 44,000 ounces of gold in various denominations of its American Eagle Gold bullion coins last month, down nearly 75% from the 175,000 ounces sold in May. For the year, gold bullion sales have dropped 76% compared to 182,000 ounces sold in June 2021.
Demand for U.S. bullion coins was at its lowest level since December 2021.
According to some market analysts, June's weak sales are startling, given how strong demand has been throughout the year. The U.S. Mint has sold 733,500 ounces this year, up compared to 653,000 ounces sold in the first half of 2021.
According to some analysts, a couple of factors appear to be dragging down bullion sales. The first is the sharp correction in equity markets. The S&P 500 fell 23% in the first half of 2022, its worst half-year performance since the 1970s. Analysts said that in this environment, retail investors don't have a lot of excel capital to buy physical bullion. Read More
Gold price remains near support at $1,730 as Fed Minutes reveal no major surprises
The gold market remains sharply lower, testing long-term support above $1,730 an ounce as the Federal Reserve signaled further aggressive monetary policy tightening later this month.
According to some economists, the minutes from the Federal Reserve’s June monetary policy meeting held few surprises for the market as the central bank continues to focus on growing inflation over growth.
“Most agreed that risks to inflation were skewed to the upside and cited several such risks, including those associated with ongoing supply bottlenecks and rising energy and commodity prices,” the minutes said.
At the same time, the Committee also saw growing risks to the economy.
“Participants judged that uncertainty about economic growth over the next couple of years was elevated,” the minutes said. “Downside risks included the possibility that a further tightening in financial conditions would have a larger negative effect on economic activity than anticipated.”
The gold market remains under pressure but is seeing little reaction to the latest minutes. August gold futures last traded at $1,736.60 an ounce, down 1.55% on the day.
The minutes also highlighted the potential for another 75 basis point rate hike at the end of this month.
“Participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting. Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the minutes said. Read More
'Gold hasn't changed, the price of gold has changed'; What the gold price reveals about the macro-economy - Axel Merk
Tuesday, gold shaved $50 off its market value, falling to nearly $1,760. The 2 percent fall in price reveals that the "perception of the macro environment" has changed, and that "speculators" have sold some of their holdings, suggested Axel Merk, CIO, and Founder of Merk Investments.
"Gold hasn't changed, the price of gold has changed," he said. "Policymakers don't have many good options, so we might be in for some pain. In the short-term, people are selling everything."
Merk spoke with David Lin, Anchor and Producer at Kitco News. Read More
Gold is 'undeservedly' cheap relative to equities as inflation sticks around - Felder Report
Expectations that the Federal Reserve will continue to aggressively raise interest rates at the end of the month have sent the gold market plunging lower, with prices testing long-term support at $1,730 an ounce.
However, one market analyst is warning that the Fed’s fight against inflation could prove futile and be good for gold prices.
In a report published Tuesday, Jesse Felder, creator of the Felder Report, said that markets anticipate that inflation pressures will quickly ease through the rest of the year. However, he added that historically inflation pressure could take longer than expected to cool.
He added that in this environment, gold continues to shine brighter than equity markets.
"If inflation proves more durable than markets currently discount, the recent volatility may be merely prelude to a more significant repricing across a number of asset classes," he said in his latest report.
"In fact, the level of CPI today already suggests that gold, relative to equities, maybe just about as undeservedly cheap as it was a half-century ago, the last time inflation really became a problem. And if inflation remains elevated, gold prices could have a terrific amount of upside ahead, especially relative to stock prices," he added. Read More
'It's a war on two fronts' for commodities as short positions grow in copper, silver, gold — Pepperstone
Recession calls are triggering a major slide in the commodities sector, with short positions quickly growing in copper, oil, gold, and silver, according to Pepperstone's head of research Chris Weston.
The European Union seems the most at risk of a recession as the European Central Bank is forced to tighten to get inflation under control amid quite bleak growth prospects. However, a recession is more of a global problem, Weston warned in a note Wednesday.
"Europe may command the closest attention, but this is a global problem. In a world of rising interest rates and central banks hellbent on putting the inflation genie back in the bottle, we've seen clear evidence of demand destruction – commodities have been the default expression of this thematic and right now there is just no visibility on growth or what changes the trend – even though the market lives in the future, it feels like this gets worse before it turns around," Weston wrote.
So far, the main takeaway from this has been the U.S. dollar index rallying to 20-year highs as it dominates other currencies, including the euro, the pound, and commodity currencies such as the Austrian dollar.
"The USD reigns supreme, not just from a relative growth perspective but from an attractiveness as an investment destination. Right now, aside from the USD, only the JPY looks like a compelling long in G10 FX," Weston said.
Recession calls mixed with a high U .S. dollar have meant negative price action for commodities. Read More
Both fundamental and technical studies agree on continued dollar strength and lower gold
This week market participants have focused intently on the future actions of the Federal Reserve as it pertains to rate hikes to be announced at the upcoming July and September FOMC meetings. Since 2018 the Federal Reserve has only raised rates on three occasions. However, all three rate hikes were announced and implemented at the last three FOMC meetings (March, May, and June).
Expectations are that the Federal Reserve will raise rates at both of the next two FOMC meetings in July and September. According to the CME’s FedWatch tool, there is a 93.9% probability that the Federal Reserve will raise rates by 75 basis points at the end of this month. This is over a 10% increase from yesterday’s FedWatch tool which predicted that there was an 83.8% probability of a 75 basis point rate hike.
This increase is a reflection of the hawkish minutes from last month’s FOMC meeting which were released today. The release of the minutes from the June FOMC meeting coupled with hawkish statements from many Federal Reserve voting members had a strong bullish influence on the dollar and a bearish influence on gold. Now for the second day this week, we have seen the dollar gain value moving to a 20-year high and gold continue to lose value now at the lowest value since last year. Read More
Massive 'capitulation event' could be happening in gold – TD Securities
With gold erasing $70 this week while the U.S. dollar surges and crude oil sells off, TD Securities is not ruling a "massive capitulation" event in gold.
The precious metal was trading near 8.5-month lows Wednesday as the U.S. dollar index rose to 20-year highs and crude oil fell below $100. August Comex gold futures were last at $1,737.10, down 1.52% on the day.
"A major capitulation event may be unfolding in gold, just a few days after our put spread expired (a strategist's kryptonite!). We see evidence that the steepest outflows from broad commodity funds since the Covid-19 crisis may be catalyzing a series of cascading liquidations from various speculative groups," said TD Securities senior commodity strategist Daniel Ghali. "This argues for substantial downside for gold in coming sessions as participants are forced to sell in a vacuum."
This trend is being observed across the whole commodities space, as investors exit their long positions amid fears of a potential recession denting future demand.
"A money manager rush for the exits is contributing to the slump in our demand signals, as broad commodity indices are weighed down by massive outflows amid recession fears. The top 15 funds by AUM have posted fund outflows above $1 billion over the past week alone, and are experiencing the steepest outflows since the Covid-19 crisis," Ghali noted. "This highlights that a potential capitulation from this cohort is contributing to the slump in prices for all commodities, which helps to explain the collapse in our real-time commodity demand indicator." Read More
Gold and silver trade higher ahead of the European open
Gold (0.36%) and silver (0.74%) are trading higher this morning ahead of the European cash open. In the rest of the commodities complex, copper (0.88%) and spot WTI (0.55%) are both trading in the black.
Risk sentiment was good overnight as the Nikkei 225 (1.47%), ASX (0.81%), and Shanghai Composite (0.36%) all traded higher. Futures in Europe are also indicating a positive cash open.
The dollar index moved lower overnight in FX markets and the biggest mover in the majors was AUD/USD (0.50%). In the crypto space, BTC/USD is 1% lower trading at $20,317.
News from overnight: 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.
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