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Gold/Silver: the Fed screwed up, again
It was an exciting week in the markets, with Equity investors able to finally have a sigh of relief and catch their breath from what has seemingly been a never-ending sell-off. Since the start of the year, the S&P 500 corrected nearly 1000 points putting the index down almost 15%, while Gold remains up 1.5%. Whether you are long Gold, Silver, S&P, or the Nasdaq, these markets are all trying to decipher the direction of inflation, policy moves from the Federal Reserve, the effects on the economy/global economy, and the underlying currencies. Now I can tell you that the Federal Reserve screwed up with the utmost confidence. They should have front-run the foreseeable inflation and began raising rates in the third quarter of 2021. Corporate confidence would have remained elevated as the base effects and comparables would have outshined year-over-year in specific sectors while growing in the fourth quarter of 2021. At that point, Crude Oil was trading in the mid-'70s, and U.S. Equities were comfortably above their pre-pandemic highs.
So you have to be asking yourself, when will the Fed come to the rescue? Read More
Tough time for gold juniors, brighter days ahead
Hugh Agro, President and CEO of Revival Gold says it is a tough market for junior gold explorers to navigate but that things should improve in the second semester with the gold market set to improve. Listen to the podcast
Gold prices still holding $1,850 as PCE core inflation rises 4.9%, in line with expectations
The gold market continues to hold around the critical psychological level of $1,850 but according to some analysts, could struggle in the near-term as inflation pressures could have peaked.
On a monthly basis, the core Personal Consumption Expenditures Index, the Federal Reserve’s preferred inflation measure, increased 0.3% last month, the U.S. Department of Commerce said on Friday. The inflation data was in line with expectations.
On an annual basis, core PCE rose to 4.9% down from the 5.2% rise seen in March. This is the second-month annual inflation measures have dropped after hitting 5.3% in February. The drop in annual inflation was also in line with expectations.
The gold market is taking the latest inflation data in stride. June gold futures last traded at $1,850.40 an ounce, up 0.19% on the day.
Some analysts have noted that gold could struggle to attract new bullish capital as the Federal Reserve continues to aggressively raise interest rates while inflation pressure fall. This would drive real interest rate higher, which would be negative for gold, a nonyielding asset. Read More
The Metals, Money, and Markets Weekly: low volumes = low Prices
Investors wait to see if gold has enough bullish sentiment to push past $1,850 next week
The gold market is ending its second week of positive gains, and while sentiment remains solidly bullish among Wall Street analysts and retail investors, there are some concerns that rising interest rates could cap precious metal prices in the near term.
According to many analysts, the biggest factor driving gold's new bullish momentum is the weakness in the U.S. dollar. The U.S. dollar remains relatively elevated; however, it has dropped 3% from its highs at the start of the month.
Analysts note that the U.S. dollar is losing ground to the euro as the European Central Bank signaled that it could start raising interest rates in July.
"With the inflation outlook having shifted notably upwards compared with the pre-pandemic period, it is appropriate for nominal variables to adjust – and that includes interest rates," said ECB President Christine Lagarde in a commentary posted Monday.
"It looks like the U.S. Dollar has peaked, for now, removing a key headwind from gold which has already started to rebound," said Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, "There is a lot of data coming out in the coming week, so currency markets could be active." Read More
Inflation is still a threat even if it has peaked
Inflation continues to dominate market headlines as consumers feel the real-world effects of rising prices.
Friday, consumers got a little bit of good news after the U.S. Department of Commerce said core Personal Consumption Expenditures Index, the Federal Reserve's preferred inflation measure, saw an annual rise of 4.9%, down from March's 5.2% increase. Inflation has dropped from February's high of 5.3%.
Also, on the inflation front, in its latest consumer survey, the New York Federal Reserve noted that while consumers see prices rising this year, three-year and five-year inflation expectations remain anchored albeit still elevated.
On paper, this is good news; however, consumers will continue to face a lot of pain as prices remain elevated for the foreseeable future. Earlier this week, the Federal Reserve acknowledged that consumers are facing hardships as inflation erodes their purchasing power, wealth and weighs on economic growth.
In a recent interview with Kitco News, Axel Merk, President, and Chief Investment Officer described the Federal Reserve's precarious position as walking along a very narrow cliff edge. While the central bank would like to get inflation under control, it won't risk creating a recession, something that markets have been increasingly worried about. Read More
Will gold price benefit from classic bear market rally in equities?
There is a new battle in the gold market as the precious metal continues to benefit from a weaker U.S. dollar and falling bond yields; however, shifting risk sentiment, as equity markets end their seven-week losing streak with a 6% rally, presents a new headwind for the precious metal.
The gold market managed to hold steady around the critical psychological level of $1,850 this week as the U.S. dollar dropped from its highs earlier in the month. The U.S. dollar index ended the week below 102 points and is down 3% from its 20-year peak.
Meanwhile, bond yields have fallen to 2.74%, down more than 13% from their recent highs above 3%.
Nicky Shiels, head of metals strategy at MKS PAMP Group, said that the weak U.S. dollar and falling bond yields could help gold push solidly above $1,850 in the shortened trading week. However, she added that risk sentiment among equity investors will be a wild card.
"The missing piece is equities are entering a vicious short-covering rally now and there's limited panic about either a recession, stock crash, or Fed hikes," she said. Read More
If gold is not the best inflation hedge, then what is? Nancy Davis
Gold and oil are not ideal investments for those seeking inflation hedging, according to Nancy Davis, Founder and Managing Partner of Quadratic Capital Management. Davis spoke with David Lin, Anchor and Producer at Kitco News. Read More
The inflation rate rises 0.2% in April; is the glass half empty or half full?
Today the BEA (Bureau of Economic Analysis) released the PCE (personal consumption expenditures) for April 2022. This report is the preferred inflation gauge used by the Federal Reserve as a key component to shape their forward guidance of monetary policy.
Image Source: Kitco News
A glass half full
In the case of today’s report, the data indicates both positive changes in the rate that inflation is rising and also indicates that inflation continues to run extremely hot and remain extremely persistent.
First and foremost, inflationary pressures in April rose 0.2% year-over-year. Although inflation continued to rise in April, the gain of 0.2% is a welcome deceleration when compared to the 0.9% gain in March. On a monthly basis, today’s report revealed a slight decline in inflation from 6.6% in March to 6.3% in April. This is the first decline in a year and a half. Read More
Gold and Bitcoin won’t protect against tyranny, all money is political – Yanis Varoufakis
Bitcoin and gold won’t protect against geopolitical turmoil, according to Yanis Varoufakis, former Finance Minister of Greece and Secretary-General of MeRA25. “Finding freedom outside of government is a dangerous fantasy,” he said.
Varoufakis is also a PhD economist and best-selling author. He spoke with David Lin, Anchor and Producer at Kitco News. Read More
Gold and silver trade higher heading into the European open
Gold is trading 0.50% higher at the start of the week at $1862/oz. Silver Is also up around the same amount and trades at $22.22/oz. Elsewhere in the commodities complex, both copper (0.50%) and spot WTI (0.75%) trade in the black.
Indices traded well overnight as the Nikkei 225 (2.19%), Shanghai Composite (0.55%), and ASX (1.45%) all pushed higher. Futures in Europe are pointing towards a positive cash open.
In FX markets, EUR/USD rose 0.27% but the biggest mover was AUD/USD which rose 0.35%. In the crypto space, BTC/USD now trades at $30,405 (4.26%).
Stories from the weekend and 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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