Daily Gold Newsletter
Gold – Remains Firm
Gold – Remains Firm
Commentary for Friday, April 28, 2023 (www.golddealer.com) – Today gold closed up $0.20 at $1990.10, and silver closed up $0.02 at $25.00. The price of gold remained firm this week, trading on both sides of $1990.00. Supported by mild safe haven demand, the Dollar Index, which lost a half point this past week, and a favorable technical picture. Good enough short-term news to suggest higher prices may be in the making but not good enough for the bulls to get out the champagne. Gold is trading around April’s price support and looking for momentum in the bargain. Without fresh information gold will continue to “channel” trade between $1980.00 and $2000.00. Last Friday gold closed at $1979.50 / silver at $25.05 – on the week gold was higher by $10.60 and silver was off $0.05. Prices remain firm but unexciting.
Please note that FedEx is no longer asking for delivery signatures. They are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.
Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for understanding.
On Monday the price of gold was surprisingly steady today considering the $30.00 pitch to the downside on Friday. This apparent support does not have much to do with significant or fresh news from the Fed regarding interest rates. And the lack of continued downward momentum today should not be considered bullish in any sense of the word. It simply reflects the existing fear that the Fed believes it has enough latitude to continue raising interest rates.
Everyone already knows the interest rate puzzle has made gold pricing a highly nuanced effort based almost entirely on the direction of interest rates. This creates a cloudy trading picture and introduces confusion between the bullish and bearish scenario – because the economic stakes could not be higher. The bulls, however, should find some encouragement in this confusion.
In March of 2022 Fed interest rates were near zero. By March of 2023 the Fed rate had climbed above 4%. A substantial change – still the price of gold remains at the higher end of its current trading range. And the physical delivery market remains hot even though these higher prices have prompted increased selling of gold and silver bullion.
Reuters (Deep Kaushik Vakil) – Gold slips into tight range as traders brace for fresh economic cues – “Gold prices eased into a tight range on Monday as traders turned their attention from a weaker dollar to this week’s upcoming economic data that may influence the Federal Reserve’s next policy decision. “This market is treading water in the short term, waiting on its next piece of economic data that could potentially jolt it in one direction or the other,” said David Meger, director of metals trading at High Ridge Futures. Gold dropped below $2,000 last week on Fed officials’ hawkish remarks and after surveys showing U.S. and euro zone business activity gathered pace in April. Markets now see an 88% chance of a 25-basis point Fed hike at its May 2-3 policy meeting, according to the CME FedWatch tool. Higher interest rates raise the opportunity cost of holding non-yielding gold. “While it will take a fresh catalyst to see the price return back above $2,000 an ounce, gold is unlikely to fall below $1,950 any time soon,” Kinesis Money analyst Rupert Rowling said in a note. Investors wait for a key Fed-favored inflation gauge, the core PCE (personal consumption expenditures) index, as well as the U.S. GDP quarterly growth rate, due later this week. “If the US enters a recession later in the year, the Fed is likely to cut rates, reducing US bond yields and dollar strength. This could push the gold price higher above $2,000/oz,” Heraeus analysts said in a note.”
On the day gold closed up $9.60 at $1989.10, and silver closed up $0.26 at $25.31.
Zaner (Chicago) – “At least to start today gold and silver are tracking positive partially off a slight downside breakout in the dollar. With a range down move on Friday, the path of least resistance remains down in gold. In retrospect, the silver market shows significantly less liquidation potential than gold. However, last week, silver ETF holdings saw significant outflows indicating a moderation of investment interest and/or liquidation by “traders” possibly for short-term purposes. In fact, seeing silver falter last week in the wake of an extremely bullish Silver Institute assessment of supply and demand in the world silver market should be disappointing to both short-term and longer-term investor bulls. The latest Silver Institute survey indicated record demand of 1.2 billion ounces last year and indicated that tally was likely restricted by the unrelenting lockdowns in China. Against the record demand growth of 18%, the Silver Institute also predicted last year’s deficit at 237 million ounces, which was also pegged as a record. The forward forecast from the Institute projects a slightly lower 2023 deficit of 142 million ounces than in 2022 (because of the rate hike cycle), but they also concluded that consistently expanding investor interest could result in unending world supply and demand deficits. In fact, in the first quarter 2022 silver ETF holdings rose from a January low of 830 million ounces to an all-time high of 859 million ounces and then one month later plummeted to the 2022 lows in March. However, current ETF holdings of 841 million ounces is 300 million ounces above the 2016 low of 500 million ounces which indicates investors have remained upbeat since the middle of 2019. Translating the impact of silver ETF holdings on the market, the addition of 100 million ounces back to the all-time highs is the equivalent of 20,000 futures contracts with the silver market on Friday trading 81,741 contracts. The latest positioning report showed the net spec and fund long in silver at 41,275 ounces, which a return to the 2020 pre-pandemic net long of 104,000 contracts would mean the net addition of 80,000 futures longs! The April 18th Commitments of Traders report showed Silver Managed Money traders were net long 21,753 contracts after increasing their already long position by 2,522 contracts. Non-Commercial & Non-Reportable traders net-long 41,275 contracts after increasing their already long position by 2,691 contracts. However, to see investors go “all in” on silver would require a very strong economic outlook or extreme flight to quality interest. With silver ETF holdings last week declining by 7.2 million ounces, it is clear investment sentiment at present is in a state of rebalancing. Therefore, on a return to $24.00 we suggest traders consider implementing far out of the money long dated September bull call spreads. With the negative chart action at the end of last week, more fears of recession than growth and a split view on inflation (abating in the US and building in Europe?), the bull camp currently has fewer bullish arguments than was present at the April highs. Nonetheless, we see the uptrend from last September’s low resuming after further balancing of the nearly longest net spec and fund long position in silver in 13 months. Gold positioning in the Commitments of Traders for the week ending April 18th showed Managed Money traders are net long 134,253 contracts after net selling 3,310 contracts. Non-Commercial & Non-Reportable traders net-long 241,735 contracts after increasing their already long position by 1,726 contracts. Last week gold ETF holdings declined by 38,851 ounces. Depending on the magnitude of risk-off this week and the prevalence of rate hike chatter, June gold could retest $1,950 which in our opinion would be a significant buying opportunity.”
On Tuesday the early New York domestic trade bought the overnight London dip in gold prices ($1976.00), pushing the US market to highs on the day ($1994.00) before settling midrange on the close. This $20.00 spread in the gold pricing has repeated of late as both rallies and dips are short lived, and traders hunker down waiting for something tangible from the Fed.
This “back and forth” pricing provides tension in the metals but can tire the physical trade and may yet take its toll on domestic safe haven demand. Gold yawned today as April consumer confidence fell to below the March reading.
The public is worried about both inflation and recession. Which is the reason gold remains in the fight for $2000.00 – a plus for the bullish scenario. It remains to be seen if the gold bulls can resolve the problem of likely higher interest rates. A few months ago, traders just assumed higher interest rates equaled lower gold prices. But a few insiders are rethinking that scenario.
On the day gold closed up $4.90 at $1994.00, and silver closed down $0.43 at $24.88.
On Wednesday the price of gold pushed as high as $2008.00 in the New York cash market, but this rally was again sold by traders who still fear higher interest rates in the near term. Still gold seems to be consolidating at these higher numbers which adds necessary encouragement to what could easily turn into a flagging bullish scenario. Reuters’ notion that this latest jump in gold prices is the result of resurfacing bank worries is a stretch in my opinion. It is just hard to believe that the average bank customer still questions their local bank’s liquidity.
Still, a “banking crisis” is the granddaddy of reasons to hide your money under the bed. Today’s headline concerning First Republic Bank’s falling earnings and customer withdrawals got the ball rolling, but the resultant weakness in the banking sector really underscores the problem. If the FDIC must step in to resolve this problem, it will enhance the bullish gold scenario.
It is worth noting that by the end of the trading day gold still finished mildly in the red and our phones are not exactly ringing off the hook. So, it is hard to tell if this ruckus is a real developing problem or another common “flash in the pan”.
Reuters (Deep Kaushik Vakil) – Gold flirts with $2,000 as U.S. banking worries resurface – Gold briefly broke above the key $2,000 level on Wednesday as fresh worries surrounding U.S. banking turmoil drove investors to the safe haven. First Republic Bank’s (FRC.N) shares hit a record low after a report said the U.S. government was unwilling to intervene in the rescue process, adding to concerns about the troubled lender’s plans to turn around its business. “That was the catalyst for gold prices to revisit slightly higher levels,” keeping U.S. yields lower, said Daniel Ghali, commodity strategist at TD Securities. Benchmark U.S. Treasury yields hit a near two-week low, reducing the opportunity cost of holding zero-yield bullion, while the dollar shed 0.7%, supporting demand from overseas buyers. “Further weakness in yields should be positive for gold as long as $1,960 holds on the downside,” said Michael Hewson, chief market analyst at CMC Markets. Traders were now focused on U.S. quarterly gross domestic product data due on Thursday, followed by the core personal consumption expenditures index on Friday, the Fed’s preferred inflation gauge. Markets had priced in about a 3-in-4 chance of the U.S. central bank raising rates by 25 basis points at its May 2-3 meeting. Those odds were lower due to “resurgent fears that there is always more than one cockroach when it comes to the U.S. regional banking crisis,” Ghalli added. Gold, which is considered a safe-haven investment during economic uncertainty, scaled an over one-year peak at $2,048.71 by mid-April as the U.S. banking crisis unfolded. On the physical side, data showed Swiss gold exports to China rose in March while shipments to India and Turkey fell.”
On the day gold closed down $8.30 at $1985.70, and silver closed down $0.01 at $24.87.
Zaner (Chicago) – “While part of the gains this morning in gold and silver prices are attributable to a slightly positive track in all physical commodities, we think flight to quality buying continues because of growing signs that First Republic Bank might not survive. Apparently, a first quarter deposit outflow of $100 billion surprised the trade and shares in the bank fell precipitously which revitalizes bank contagion fears. Adding into the bull case is the prospect of a slight tempering of fear of next week’s FOMC meeting as the pattern of soft US scheduled data this week has extended and is expected to continue today. Yesterday gold ETF holdings saw an inflow of 52,589 ounces but holdings are still down 0.4% year-to-date. While China posted a 1.9% first quarter increase in gold production, the country also reported a larger gain of 12% in gold consumption. The increase in Chinese first quarter gold output resulted in 85 tonnes of extra production while overall gold consumption was at 291.6 tonnes dwarfing the increase in supply. In retrospect, seeing gold waffle around unchanged yesterday in the face of strong demand signals from China and in the wake of a noted decline in US treasury yields should be disappointing to the bull camp. Near term resistance is $2020.30, uptrend channel support in June gold is now $1,990.70 and a pivot point failure is seen with a trade today below $1,982. Seeing silver break sharply yesterday was not surprising given the ongoing negative view toward most physical commodities. However, July silver rejected the washout and closed more than $0.50 above the spike low in a possible sign of a technical bottom. It should be noted silver ETF holdings yesterday saw a massive single day 8-million-ounce inflow reversing significant outflows over the prior 5 sessions and lifting the year-to-date gain in silver holdings to +0.7%. Limiting silver on the upside is a 5.1% increase in 1st quarter Fresnillo PLC silver production to a total output level of 13.1 million ounces. We see silver remaining vulnerable unless the early positive commodities vibe is accentuated by a surprisingly strong equity market rally. A key pivot point in July silver today is $25.05 with resistance today pegged at $25.65 and $25.53.”
On Thursday the price of gold held the important $2000.00 level in the overnight Hong Kong and London markets, but the New York domestic market experienced a profit taking swoop to the downside ($1975.00) before light bargain hunting steadied daily business. Gold finished mildly in the green for the day – a plus for the gold bulls.
But this market remains nervous over the possibility of still higher interest rates, which continues to hinder higher gold prices based on rising inflation.
The next possibility of fresh FOMC news is not far away (May 2nd and 3rd) but I believe that the Chief will hold everyone’s hand until the following FOMC meeting (June 13th and 14th). The May meeting is the one associated with a Summary of Economic Projections and has a much greater possibility of creating “fresh information” which could move gold one way or the other.
Traders are expecting a small interest rate hike at the June meeting, which is enough to keep the price of gold defensive but not so much that Wall Street becomes more nervous. The outcome here will likely define gold’s short-term direction. If the Fed boys raise a quarter point gold will likely remain rangebound. If they get crazy (not likely) and raise interest rates a half point, gold will likely test recent lows. If they decide to stand pat, gold will likely test recent highs.
There is nothing new or particularly informing about the above comments. This is the exact same scenario the metals have been dealing with since last year. And it will likely not change until everyone is satisfied that interest rates are generally moving lower.
On the day gold closed up $4.20 at $1989.90, and silver closed up $0.11 at $24.98.
On Friday the gold trade looked sleepy, but the good news is that traders still “bought the dip” and our shiny friend finished the day almost unchanged in price. The technical picture remains positive, but the lack of buzz is distracting and suggests this “sideways” trade will remain in place until traders become more comfortable with Fed interest rate policy.
Jim Wycoff (Kitco) – Technically, the gold futures bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the April high of $2,063.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the April low of $1,965.90. First resistance is seen at $2,000.00 and then at this week’s high of $2,020.20. First support is seen at last week’s low of $1,980.90 and then at $1,965.90. The silver bulls have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing May futures prices above solid technical resistance at the April high of $26.235. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at this week’s high of $25.435 and then at last week’s high of $25.71. Next support is seen at this week’s low of $24.53 and then at $24.25.”
Reuters (Deep Kaushik Vakil) – Gold holds losses as inflation data reinforces rate hike bets – “Gold eased on Friday after a rise in U.S. inflation in March buoyed the dollar and reinforced bets for an interest rate hike next week, but banking sector concerns kept bullion on course for a small monthly gain. The U.S. core personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 0.3% in March, the same as in February and in line with expectations, with traders adding to bets for a rate hike next week. Elevated rates dull zero-yielding bullion’s appeal. Gold seemed to largely ignore the last key piece of data ahead of next week’s meeting, but “a 25-bps hike next week is now certain though it remains in question whether the Fed will signal a pause”, said Tai Wong, an independent metals trader based in New York. “Gold seems likely to remain in its tight recent range for now, though a weekly close under $1,965 could trigger further losses, while bulls would welcome a push back above $2,000.” The dollar held gains after the inflation data but is headed for a monthly decline. A weaker dollar makes bullion cheaper for overseas buyers. Bullion consolidated this month due to “growth concerns sending U.S. rate cut expectations higher, softer bond yields and a continued lingering banking sector concern”, said Ole Hansen, head of commodity strategy at Saxo Bank. Gold had scaled a one-year peak of $2,048.71 in mid-April as the banking crisis unfolded.”
On the day gold closed up $0.20 at $1990.10, and silver closed up $0.02 at $25.00.
Platinum closed down $3.10 at $1088.20, and palladium closed up $17.50 at $1517.90.
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