Today's Gold and Silver News - May 20th

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Gold, silver look cheap as Fed rate hikes create threat of a recession - Degussa

The gold market continues to struggle to make material gains above $1,800 an ounce. Still, the precious metal remains cheap as investors continue to miss-price risk in the marketplace, according to one market analyst.

In his latest market commentary, Thorsten Polleit, chief economist of Degussa, said that both gold and silver are relatively cheap as investors ignore the growing risk that the Federal Reserve will push the U.S. economy into a recession as it raises interest rates.

According to the CME FedWatch Tool, markets expect interest rates to be at least 3% by the end of the year. Markets expect the U.S. central bank to raise interest rates by 50-basis points at the next three monetary policy meetings.

"That doesn't sound much. But the expectation that the Fed would end its extremely expansive policy has already triggered something of a landslide on the financial markets," he said in the report.

One of the reasons why gold and silver have seen significant selling pressure in the last four weeks is because investors have faith that central banks can engineer a "soft landing" that will weaken the economy enough to slow-growing inflation pressures but not enough to push it into a recession. Read More

Wall St bounces off lows late as growth fears persist, safe-havens gain

As the dollar weakened overnight and into the open, so gold and silver caught a bid. Gold is into the congestion area between $1,835 and $1,850, while silver continues to trade between $21.50 and $22.10. Platinum seems to have found support around $935 again, with resistance at $965.

Stocks continue to be pressured, with the 200-day moving average on the S&P weekly interval chart still some 400 points lower. Looking backward shows the 200DMA is to be respected as far as mean reversion, and the price is now approaching a more suitable delta to the average.

Image Source: Kitco News

The case for the reversal in the dollar at major resistance continues to develop, and the probability has now improved, as a look at the below chart will show. Should the USD close this week at its low or close, the case for a top in the dollar begins to find ground again. The divergence between price and momentum would be another indicator the USD is ready to roll over. Read More

Gold prices holding at session highs as U.S. existing home sales fall 2.4% in April

The gold market continues to trade near session highs, supported by more disappointing economic data. Rising interest rates continue to cool down the U.S. housing market as fewer consumers purchased home last month, according to the latest data from the National Association of Realtors (NAR).

Existing home sales fell to a seasonally adjusted and annualized rate of 5.61 million units last month, down 2.4% compared to March's annualized rate of 5.75 million homes, the NAR said on Thursday. Market consensus projections called for existing home sales to fall only slightly to 5.65 million.

For the year, home sales are down 5.9%, the report said.

The gold market has seen some renewed technical buying momentum, which has been supported by weaker-than-expected economic data. June gold futures last traded at $1,842.40 an ounce, up nearly 1.5% on the day.

The U.S. housing sector has faced some challenging headwinds as the Federal Reserve looks to aggressively raise interest rates, which in turn is pushing mortgage rates higher.

"Higher home prices and sharply higher mortgage rates have reduced buyer activity," said Lawrence Yun, NAR's chief economist. "It looks like more declines are imminent in the upcoming months, and we'll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years." Read More

The S&P 500 is just getting started; further declines in equity markets will continue to support gold prices - analysts

Continued selling pressure in equity markets is helping the gold market shine again as a safe-haven asset. According to some economists, rising inflation pressures are adding to the growing risks of an economic slowdown.

The gold market has managed to push above critical initial resistance at $1,830 an ounce as equity markets continue to suffer. According to market analysts, investors are fleeing stocks as rising inflation weighs on earnings for the first quarter.

Wednesday, the S&P 500 dropped 4%, its worst one-day decline since June 2020, when the global COVID-19 pandemic roiled financial markets. The selling pressure hasn't eased much as the S&P is down another 1% on Thursday.

Meanwhile, gold prices managed to find support at $1,800 an ounce Wednesday and have seen some technical follow-through buying Thursday. June gold futures last traded at $1,843.70 an ounce, up 1.5% on the day.

"Gold appears to be finally seeing some safe-haven flows as markets react strongly to the threat of recession rather than just higher interest rate expectations. The latter has driven yields higher and made the dollar more attractive while the economic woes they contribute to seem more suited to gold inflows, it seems," said Craig Erlam, senior U.K and European market analyst at OANDA. Read More

Gold, silver see solid gains as USDX slumps

Gold and silver prices are posting good gains in midday U.S. trading Thursday. The precious metals are boosted by a sharply lower U.S. dollar index and a slight decline in U.S. Treasury yields on this day. A wobbly U.S. stock market is also working in favor of the metals market bulls. June gold futures were last up $25.40 at $1,841.30. July Comex silver futures were last up $0.321 at $21.86 an ounce.

Image Source: Kitco News

Technically, June gold futures see a nine-week-old price downtrend still in place on the daily bar chart. Bears have the firm 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 the May low of $1,785.00. First resistance is seen at today's high of $1,848.20 and then at $1,875.00. First support is seen at $1,825.00 and then at today's low of $1,808.40. Wyckoff's Market Rating: 3.5.

Image Source: Kitco News

July silver futures prices scored a bullish "outside day" up on the daily bar chart today. A price downtrend is in place on the daily bar chart. 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 $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at $22.25 and then at $22.50. Next support is seen at today's low of $21.25 and then at $21.00. Wyckoff's Market Rating: 2.5. Read More

This algorithm says gold is 'cheap' as safe-haven plays dominate

From a mathematical perspective, Quant Insight sees gold's current trading levels as "cheap,", especially with safe-haven plays dominating the market.

Gold looks like a bargain after plunging back down towards the $1,800 an ounce level during the last few sessions in light of the upcoming Federal Reserve's aggressive rate hikes, Quant Insight's head of analytics Huw Roberts told Kitco News.

"We have gold as cheap on our models, anywhere between 5% to 7% undervalued, depending on which time horizon you're looking at," Roberts said this week.

Quant Insight's algorithm is all about the macro drivers. It looks at economic fundamentals, such as growth and inflation, and financial conditions — whether the real yields are rising, the yield curve is flattening, or the dollar is getting stronger, explained Roberts.

"We run any asset, whether an equity, a bond, or a commodity. And we train the price action of that asset on those macro factors. And then it's all down to the algorithms. There's no discretion whatsoever. This is where we differ from the majority of the research world — our view is 100% systematic," he said.

After putting it all together, gold looks undervalued, but there is one caveat — the level of confidence of the algorithm.

"The algorithm produces a model confidence number, which basically means 'goodness of fit' — how effective the model is at displaying price action in the assets at the moment. And our threshold is above 65% for any signal to be valid. And right now, although we have gold as cheap, the model's confidence is around 50%," Roberts added. Read More

The 'forgotten' element in the battery metal space - TinOne Resources' Chris Donaldson

When people think of battery metals, most think of copper, nickel, and lithium but not tin said TinOne (TSXV: TORC) Executive Chair Chis Donaldson.

On Tuesday Donaldson spoke to Kitco at the Vancouver Resource Investment Conference.

Tin demand is expected to ramp up due to global electrification. About 50% of consumed tin is used in solder, with very few available substitutes and a low sensitivity to tin price, according to TinOne. The International Tin Association forecasts tin demand to increase from 2% to 3-4% over the next decade due to 5G roll-out and energy transition.

"It's considered the forgotten in the [battery metal] space. Tin is used in almost any energy application. Half of its uses are within soldering," said Donaldson. "It is the glue that holds together electrification." 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.