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Gold Recovers Some of its Losses From Challenging Month on Signs of Less Aggressive Fed
On the last trading day of July, gold looks set to end a challenging month on a positive note as signs that the Federal Reserve may be less aggressive with its future interest rate hikes have allowed the precious metal to recover some of the month’s losses.
While the US central bank did confirm market expectations with another 75 basis points increase in its benchmark rate earlier in the week, some of the rhetoric that supported the announcement was interpreted as the Fed being less likely to make such large moves going forward.
The fact that gold has been able to gain so much since the Fed’s announcement, with the price gaining about $40 an ounce to around $1,760, shows there is still significant support for the haven asset as talk of a recession in the US and other countries intensifies.
How much further gold can recover will largely be determined by the same two factors that pushed it down earlier in the month: the strength of the US dollar and the actions of the Fed, both in terms of comments by central bank officials and the actual interest rate moves themselves.
With markets still remaining very jittery, it has often been words that have spooked or emboldened investors and traders, more so than the final action which has often been priced in by the time the move arrives. Read More
Silver Leaps Back Above $20 as Signs of Smaller Future Fed Hikes Finally Bring Price Relief
Silver is back above $20 an ounce!
After months of silver’s price only going one way, the tentative evidence of the bottom being reached has now developed into a recovery of sorts following the comments supporting the Federal Reserve’s interest rate decision earlier in the week.
So strong has been the initial reaction to signs that the Fed may be less aggressive with future interest rate moves that silver looks set to end July almost back where it started the month. This is a neat illustration of silver’s increased volatility compared with its precious metal peer, gold.
The same factor, a potentially less aggressive Fed, has also seen gold recover some of the ground it has lost over the course of the month but while gold still remains some way below the levels it was at the end of June, silver’s outsized gains have seen it make up for lost time and be back above the psychologically important threshold of $20 an ounce.
Silver investors will be hoping this is the start of a sustained rally as, from a fundamental perspective, the price still looks some way off fair value given the burgeoning demand for the metal as part of the energy transition.
However, silver’s volatility has left many a punter burnt in the past and while the long-term outlook remains supportive, nearer-term factors of how great the Fed’s next interest rate move actually is as well as concerns that the world is tipping into a recession, and therefore diminishing industrial demand for silver, may yet drag on silver’s attempts to recover more of the ground it has lost since mid-April. Read More
Gold price can build on its 2% rally after Fed’s 75 basis point move - SSGA's Milling-Stanley
Financial markets, including gold, have breathed a collective sigh of relief after the Federal Reserve raised interest rates by 75 basis points. According to one market strategist, this could be an important turning point for the precious metal.
In an interview with Kitco New, George Milling-Stanley, chief market strategist at State Street Global Advisors, said that gold's recent drop below $1,700 was an exaggerated move and its push back above $1,750 is a closer representation of its fair value. He added that growing economic uncertainty and ongoing geopolitical turmoil will continue to support prices, especially as the Federal Reserve is closer to the end of its tightening cycle.
"I have been please that gold prices were able to hold support around $1,700 an ounce and I expect that the market will be able to build on the move that we are currently seeing," he said.
Milling-Stanley added that he is not surprised that gold prices have rallied 2% the day after the Federal Reserve's monetary policy decision. He noted that the U.S. central bank could have been a lot more hawkish; instead, Federal Reserve Chair Jerome Powell struck a solid tone that further aggressive rate hikes will be data-dependent.
Powell also said Wednesday that the central bank would be prepared to slow the pace of rate hikes as the economy reacts to its aggressive monetary policy.
"As of today, the markets have decided that there are another two months before the next meeting. And that is time for a lot of data to be released," he said. "The consensus seems to be in September, we will only be looking for a 50-basis point increase, and it may get lower in October. Markets are seeing the light at the end of the tunnel," he said.
Milling-Stanley added markets are now focusing more on the threat of a recession than Fed rate hikes, which could weaken the U.S. dollar and cap bond yields. At the same time, he added that even if the economy slows, it is unlikely the Federal Reserve will be able to bring inflation entirely under control. Read More
Gold prices holding above $1,750 as core PCE inflation rises 4.8% in June
The gold market is holding on to solid gains as inflation pressures continue to rise more than expected.
On a monthly basis, the core Personal Consumption Expenditures price index increased 0.6% last month, the U.S. Department of Commerce said on Friday. The inflation data was hotter than expected as consensus forecasts were calling for a 0.5% rise.
On an annual basis, core PCE increased 4.8%, up from last month’s reading at 4.7%.
The core inflation strips out volatile food and energy prices and is the U.S. central bank's preferred inflation measure.
Meanwhile, headline inflation also rose more than expected, increasing 1.0%, up from May’s increase of 0.6%. For the year inflation jumped to 6.8%, up from May’s reading of 6.3%. Inflation continues to hold near its highest level in 40 years.
The gold market is not seeing much reaction to the latest inflation data as it holds most of its recent gains above $1,750 an ounce. August gold futures last traded at $1,755.60 an ounce, up 0.30% on the day.
Analysts have said that the latest inflation data is a double-edged sword for the gold market. The latest data shows that inflation remains persistently high; however, it could force the Federal Reserve to continue to aggressively raise interest rates longer than markets currently expect. Read More
Why did gold price outlook just change? All eyes on next week's employment report
Gold rallied in response to the repricing of Federal Reserve rate hike expectations after the July FOMC meeting, but gold is not out of the woods just yet, with analysts not ruling out a drop back to $1,700.
After raising rates by 75 basis points on Wednesday, Fed Chair Jerome Powell said another oversized super hike would be possible in September. Still, it all depends on the fresh rounds of macro data. And before the September meeting, there will be two rounds of inflation and employment data prints to digest.
Powell also signalled that after hiking rates by 150 basis points in just 40 days, the Fed is now at neutral, which means that the Fed could soon start slowing its rate hike pace.
"Now that we're at neutral, as the process goes on, at some point, it will be appropriate to slow down. And we haven't made a decision when that point is, but intuitively that makes sense. We've been front-end loading these very large rate increases. Now we're getting closer to where we need to," Powell told reporters.
Data-wise, signs point to still problematic inflation numbers and a slowdown in the economy.
The Fed's preferred inflation gauge - the personal consumption expenditures price index - rose 6.8%, the most significant annual increase since the 6.9% posted in January 1982, the Bureau of Economic Analysis said Friday. Read More
The Fed should increase rates beyond 9%; Gold or Bitcoin standard won't control inflation - John Cochrane
On Wednesday, the Federal Reserve increased its key rate by 75 bps. Markets reacted positively to this, sending the S&P 500 up by 2.6 percent.
Markets clearly interpreted the Fed rate hike as dovish, said John Cochrane, Senior Fellow at the Hoover Institution and Professor of Economics at Stanford University.
"The markets seem to think we've got maybe one or two more [rate hikes], and then we're done," he explained. "Good luck to them. I think the Fed is going to keep raising interesting rates as long as inflation stays high."
Cochrane spoke with David Lin, Anchor and Producer at Kitco News. Read More
The Federal Reserve's slight shift in monetary policy will drive bullish momentum in gold price next week
According to the latest Kitco News Weekly Gold Survey, Wall Street analysts and Main Street investors see the potential for higher prices next week. The new bullish sentiment comes as gold prices end the week with a 2% gain testing a critical resistance point. December gold futures last traded at $1,783.30 an ounce.
Daniel Pavilonis, senior commodities broker with RJO Futures, said that he sees a perfect setup for gold in the near term that will lead to higher prices. He noted that the bounce in gold comes as sentiment has been significantly bearish.
Pavilonis said higher prices would create a short-squeeze as bears leave the market. However, fundamentally, a less hawkish U.S. central bank through the rest of the year will support higher prices.
Although Federal Reserve Chair Jerome Powell said that further aggressive tightening remains possible, he added that the central bank would remain data-dependent. At the same time, he also said that at some point, the Federal Reserve would have to slow the pace of tightening as the economy feels the impact of rising interest rates.
"The Fed is signaling that it is not going to be as hawkish on rates as they have been," Pavilonis said. "Gold is off to the races now." Read More
Fed Rate hikes are starting to bite and that is good for gold
After three months of sharp declines, the gold market is seeing some new bullish momentum. It comes as the U.S. economy contracted for the second consecutive quarter.
Economists and politicians are fairly evenly divided as to whether or not the U.S. is in a recession. The National Bureau of Economic Research (NBER) is the agency that would officially declare a recession, which happens after months of research and debate; however, the traditional definition is when an economy contracts for two consecutive quarters.
Despite what politicians and economists might think, consumers are started to feel the effects of rising interest rates and persistently high inflation. Data from the U.S. Conference board this week showed consumer confidence for July fell to its lowest level since February 2021. The growing pessimism is expected to weigh on growth further. At the same time, a Twitter poll this week showed that 80% of Kitco News followers think the U.S. is in a recession.
While we will leave the recession debate to politicians and economists, there is no doubt that the U.S. economy is slowing. The Federal Reserve's monetary policy is starting to bite, and according to market analysts, that is good for gold. Suki Cooper, precious metals analyst at Standard Chartered, said that on average, prices have gained 15% on an annualized basis during the past seven recessions.
In the face of a slowing economy, the U.S. central bank raised interest rates by 75 basis points. At the same time, Federal Reserve said that further aggressive tightening would be warranted if the data supported it. Read More
Recent reports confirm high inflation and rising rates have led to a recession
Both gold and silver prices have spiked dramatically higher over the last two weeks and accelerated their upward momentum over the last two days. Gold and silver prices have moved to new multiweek highs in response to three major reports and events that have confirmed what the American public has been acutely aware of for some time. First, that inflation is running rampant and continues to spiral out of control to higher levels. Based on the latest CPI numbers inflation is running at a 41-year high of 9.1%.
This is despite dramatic and extremely hawkish action by the Federal Reserve which has raised interest rates over the last four consecutive FOMC meetings in higher increments. Beginning in March the Fed raise rates by 25 basis points. The following FOMC meeting in May resulted in the Fed raising rates by 50 basis points. This was followed by 75 basis point rate hikes at both the June and July FOMC meeting.
Despite their dramatic attempt to reduce inflation, the core CPI reported a few weeks ago had a fractional decline from 5.9% to 5.7%. However today the government reported that the core PCE price index increased by 0.5%. This means that PCE prices are expected to be up 6.6% YoY (Year-on-Year), and core PCE prices are up 4.7% YoY.
These latest reports indicate that the Federal Reserve's aggressive rate hikes have been ineffective in reducing “headline” and core inflation. Recent rate hikes by the Federal Reserve have taken the Fed funds rate from near zero to 2.25% leading to only one major accomplishment if you can call it that. They have effectively contracted the U.S. economy for the last two consecutive quarters.
It is emphatically clear that the United States economy has met the definition of a recession regardless of what the government wants us to believe. Therefore, yesterday and today's extremely robust move in both gold and silver are highly warranted and long overdue. Read More
The Metals, Money, and Markets Weekly: S is for stagflation - Mickey Fulp
Gold is trading marginally lower ahead of the European open
Gold (-0.06%) is trading flat ahead of the European open but silver is down 0.65%. Elsewhere in the commodities complex, copper (-0.76%) and spot WTI (-0.51%) are both struggling as nearly all commodities have had a tough start to the week.
Risk sentiment was positive in the Asia Pac area as the Nikkei 225 (0.69%), ASX (0.69%), and Shanghai Composite (0.12%) all closed higher. Futures in Europe are pointing to a negative open.
In FX markets, USD/JPY was the biggest mover overnight falling 0.62%. In the crypto space, BTC/USD (-0.39%) is trading at $23,217.
News from overnight at the weekend: 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.
