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Silver Slides to Near Lowest Level This Year as Strong Dollar Becomes Latest Bearish Factor
Silver has had a startling fall from grace among investors and now finds itself struggling to hold above $22 an ounce.
It was only a matter of weeks ago that the metal was trading comfortably above $25 an ounce, with that level proving an important support. However, once that support fell away, the price has failed to find any support at lower levels and is now trading close to its lowest point of the year.
The latest driver for silver’s decline is the strength of the dollar which has put pressure on all assets priced in the US currency. Furthermore, the reason for the dollar’s strength, the Federal Reserve’s planned series of interest rate hikes, is also a negative factor for silver as the appeal of the precious metal starts to dwindle when rates rise as its lack of yield makes other assets such as interest-paying bonds more attractive.
It will be interesting to note the price reaction if and when silver does drop below $22 an ounce as this psychological threshold should surely finally provide support with investors taking the opportunity to buy into the metal’s depressed valuation. Read More
Ever-Strengthening Dollar Allied to Fed Rate Hikes Keeps Gold Under Pressure
The strength of the US dollar, which is now trading at its highest level in two years, has brought renewed pressure to gold with the price now hovering around the $1,870 an ounce mark.
The dollar is proving the haven asset of choice at a time of continued falls on equity markets in the wake of the Federal Reserve’s trajectory of interest rate hikes and now concerns over China’s economic growth due to the ongoing COVID-related lockdown.
Given that the dollar has found strength from the Fed’s recent 50 basis points increase in its interest rate and with further hikes expected in the coming months, it is difficult to see where gold can make significant gains in the medium-term. The interest rate increases are presenting dual headwinds for gold as on top of strengthening the US dollar, they are also diminishing the appeal of non-yield bearing assets.
Yet while further gains may prove challenging, the ongoing war in Ukraine will provide strong support for gold with the asset likely to trade in the $1,840-$1,870 range as long as these two elements are the principal drivers for markets. Read More
The next major technical support area in gold
Gold has had a pretty strong sell-off at the start of the week and that leads traders and analysts to look for potential support levels on the higher timeframes. The technical signals to the downside have been pretty strong and there are some interesting price points close by. Check out the technical analysis
Gold, silver see more punishment from rising bond yields
Gold and silver prices are lower in midday U.S. trading Monday, but up from their sharp earlier losses. Rising bond yields are once again hitting the precious metals. Sharply lower crude oil prices today are also a negative for the metals markets. June gold futures were last down $18.40 at $1,864.10 and May Comex silver was last down $0.367 at $22.00 an ounce.
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Technically, June gold futures see a two-month-old price downtrend line in place on the daily bar chart. Bears have the overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,875.00 and then at today’s high of $1,886.60. First support is seen at today’s low of $1,854.80 and then at the May low of $1,849.70. Wyckoff's Market Rating: 4.0.
July silver futures prices hit a nearly five-month low today. A steep price downtrend is in place on the daily bar chart. The silver bears have a solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the December low of $21.565. First resistance is seen at today’s high of $22.395 and then at Friday’s high of $22.665. Next support is seen at today’s low of $21.665 and then at $21.565. Wyckoff's Market Rating: 2.0. Read More
Gold ETF holdings are just 1% off of 2020 highs, but market is slowing - WGC
After a robust first-quarter start, investment demand for gold-backed exchange-traded funds started to cool last month as investors began to position themselves for the Federal Reserve's aggressive monetary policy tightening, according to the latest data provided by the World Gold Council.
In a report published Friday, the WGC said that 43 tonnes of gold flowed into the paper ETF market in April. The inflows lifted total global holdings to 3,869 tonnes, valued at $238 billion. Total holdings are just 1% below the all-time high of 3,922t in November 2020.
"While this is 77% lower than the previous month, which was the strongest since February 2016, it is the fourth consecutive month of inflows, maintaining the momentum of flight-to-quality flows we have witnessed this year," the analysts said. "Gold faced pressure during the month as yields rose sharply – U.S. 10-year real yields briefly turned positive for the first time since 2020 – in response to progressively more hawkish central bank rhetoric, while the U.S. dollar strengthening significantly." Read More
Hedge funds sell gold for the third straight week
For the third consecutive week, hedge funds reduced their bullish bets on gold and increased their short exposure as investors prepared for the Federal Reserve to raise interest rates by 50-basis points for the first time in more than two decades.
The latest trade data from the Commodity Futures Trading Commission (CFTC) shows growing bearish sentiment in the precious metals market; however, some analysts have noted that the gold market remains healthy despite rising interest rates.
Some analysts have said that the gold market has seen some expected consolidation following a strong first-quarter performance, which saw prices push to $2,000 an ounce.
However, some analysts see room for lower prices in the near term. In a report Friday, commodity analysts noted that there are a lot of complacent bullish investors still in the gold market.
"Net non-commercial futures length plummeted -3.5% on the week, with participants shedding some complacent length associated with the war in Ukraine ahead of the Fed's highly-anticipated hike and announcement on quantitative tightening. With the Fed telegraphing its every move, positioning analytics will be key for price action. We still see a significant amount of complacent length remaining in gold, while the breadth of traders short has just started to rise from near-record lows," the analysts said. Read More
Cash is the king as financial market melt-down continues taking gold lower
Gold prices also experienced a sharp price decline and as of 4:55 PM EDT, the most active June 2022 futures contract is down $29.20 or 1.55% and fixed at $1853.40. The only precious metal to gain value on the day was palladium. Palladium futures gained $50.30 a net gain of 2.49%, and are currently fixed at $2073.50.
Image Source: Kitco News
The dramatic sell-off in financial markets and the precious metals are in response to both the recent action of the Federal Reserve as well as the Fed outlook for the next two FOMC meetings. The Federal Reserve raised the Fed funds rate by half a percent at this month’s FOMC meeting and indicated that it would likely continue the trend of ½% rate hikes at both the June and July FOMC meeting. Read More
Gold price's 5-year outlook: $1,300 or $4,000? MKS PAMP weighs in
With the Federal Reserve's tightening cycle on everyone's minds, where will the gold price be five years down the line?
According to the analysis provided by MKS PAMP, there are two options for the precious metal — dropping to $1,300 an ounce or surging to $4,000 an ounce. But it all depends on how fast or slow the Fed tightens.
To project where the gold price could be in 2027, MKS PAMP looked at the yellow metal's response to the past Fed hiking cycles.
"As the markets continue to digest whether a 50/50/50x hiking profile (vs. 50/75/50x over the next few meets) is actually enough to tame inflation, induce a recession etc., it's worthwhile to take a step back and assess just what Gold did during past slow and fast Fed hiking cycles," said MKS PAMP metals strategist Nicky Shiels. "There is a lot of asymmetrical risk depending on whether the Fed hikes quickly (as seen in years 1980/1987/1994) or slowly (years 2016/2004/1999/1977)."
In a slow cycle scenario, defined by incremental hikes, gold could be at $4,000 an ounce in five years. 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.
