Gold Trades to a Critical Price Support Level this Week

Gold futures basis the most active December 2021 contract is currently fixed at $1750.60, which is a net gain of $0.80 (+0.05%) on the day. Gold futures did trade with a lower high and a higher low when compared to yesterday’s trading range. The largest decline occurred yesterday, a delayed reaction to Wednesday’s conclusion of this month’s FOMC meeting.

gold daily

The fundamental event that pressured gold dramatically lower yesterday was the release of the FOMC meeting statement and Chairman Powell’s press conference. In terms of when the Federal Reserve will begin to taper, the statement acknowledged that tapering will begin “soon”. It is now believed that an announcement as to when the Federal Reserve will begin the process of tapering their monthly asset purchases will be in November. It is also widely believed that tapering could begin as early as December.

However, the news that startled market participants and gold investors was the newly revised “dot plot”, which shows the projections of interest rate normalization. The most recent projections revealed that there could be an interest rate hike next year rather than 2023. The Federal Reserve has made it emphatically clear that their timeline to begin tapering, and their timeline to initiate lift-off of interest rate normalization have different criteria.

The Federal Reserve also acknowledged that inflationary pressures will probably be sustained for a longer period than the most recently projected. The Fed has been focusing on maximum employment rather than inflationary pressures, both of which compose their primary dual mandate. Inflationary pressures continued to mount as indicated by the release this month of the August CPI. It indicated an increase of 0.3% from July to August. The report from the Bureau of Labor Statistics also indicated that inflation has risen to 5.3% for the 12 months ending in August 2021.

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in August on a seasonally adjusted basis after rising 0.5 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.3 percent before seasonal adjustment.”

It is this report that is most likely the underlying rationale for the Federal Reserve moving up their timeline for liftoff when they will raise interest rates for the first time since the onset of the pandemic over 20 months ago.

Gold’s strong bearish reaction to the potential for interest rates rising quicker than the Federal Reserve had projected previously. This is because higher interest rates intrinsically increase the opportunity of holding gold which yields no interest gains to the investor.

Gold is currently very susceptible to lower pricing and on a technical basis is at a key and critical level. Our technical studies indicate a Fibonacci harmonic’s between two data sets, one created from daily charts, and the other created from weekly charts.

gold weekly ST

The longest data set begins in October 2018 when gold was trading at $1171, up to the current record high achieved in August of last year when gold reached an apex of $2088. Currently, gold’s low this week matched the 38.2% Fibonacci retracement of this long data set. It also matched the 61.8% Fibonacci retracement which was created from a daily chart. A Fibonacci harmonic’s occurs when two different data sets have the same price point for one of the key Fibonacci numbers. This makes that price point a much more critical level on a technical basis.

gold weekly LT

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Bullish Risk-on Market Sentiment and a More Hawkish Fed Take Gold Prices Lower

The first punch occurred yesterday as the Federal Reserve concluded its September FOMC meeting in which revealed a more hawkish demeanor. They penciled in the potential for one rate hike in 2022, which was absent from the last interest rate projection or dot plot. As expected, they did not announce a date on which tapering would begin nor the rate at which they would taper their monthly asset purchases. However, many analysts correctly predicted that there would not be a concrete announcement of a taper timeline and start date until November, with the earliest starting date December of this year or the first quarter of next year.

Reaction to the FOMC meeting in U.S. equities was the polar opposite of the effect it had on the safe-haven asset gold. In the case of U.S. equities, they were able to focus upon the strong retail sales numbers that were reported earlier this month. Forecasts by economists polled on consumer spending predicted that there would be a decline of 0.8%, while another poll indicated that there would be a decline of 1.8%. In this case, the analysts underestimated pent-up consumer demand, which resulted in consumers increasing their retail spending by +0.8%. However, if you stripped out automobile sales from the report by the U.S. Census Bureau, the actual increase would have been + 1.8%.

Strong consumer spending might have been a catalyst taking U.S. equities dramatically higher with the Dow Jones industrial average gaining 500 points on the day and closing at 34,764.82, a gain of 1.48%. The NASDAQ composite gained 1.04% and closed at 15,052.2438. The Standard & Poor’s 500 gained 1.21% and closed at 4448.98.

gold daily

While equities traders seemed unfazed by a more hawkish monetary policy going forward, the same cannot be said for either the U.S. dollar or gold which both traded lower on the day. Gold futures basis the most active December 2021 Comex contract lost $36 and closed at $1742.80 in New York. Concurrently the dollar index gave up 0.38% and closed at 93.105. Silver also sustained a drawdown, losing 1.69% on the day with the most active December contract settling at $22.52.

silver 923

In the case of gold and silver, it seemed as though market participants disregarded the upcoming vote on Monday of next week to raise the debt ceiling. There are tremendous implications if they are unable to come to a bipartisan agreement. This could cause the government to shut down some essential services and also create issues concerning the United States servicing interest payments on its debt.

The Fed did leave rates vis-à-vis the Fed funds rate between zero and 25 basis points, but they also moved the timeline up for liftoff.

Inflationary projections by the Federal Reserve are now anticipating the potential for a more sustained level of inflation which could be the underlying data that the Federal Reserve used to pencil in a rate hike next year which was a defined shift from their former monetary policy in regards to lifting off to normalize rates.

gold weekly

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

 

A Divided Federal Reserve

During his Press conference he expressed that tapering will begin “soon” with no clear-cut date for the initiation of the onset of tapering. The release statement said that “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”

The statement acknowledged that for the most part, the economic recovery continues to strengthen. “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen.” However, the statement also expressed the largest risk factor facing a full economic recovery.

“The path of the economy continues to depend on the course of the virus. Progress in vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain … In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

dot plot to 2024

It was the release of the Federal Reserve’s interest rate projections (dot plot) that showed that Federal Reserve members are very divided in regards to when they will initiate “lift-off” and normalize rates. The only timeline in which Fed members voted unanimously was to hold interest rates at their current level throughout 2021. However, as to 2022, Federal Reserve members were split down the middle with nine of the 18 top officials indicating no interest rate hikes in 2022, and nine of the 18 top officials signaling lift off at some point in 2022. Six members voted to raise interest rates by 25 basis points, to ½%, and the remaining three more hawkish top officials suggested taking interest rates to 75 basis points or ¾%. The division becomes pronounced in 2023 with a much wider range for their forward guidance. The dot plot indicates that there is a tremendous range between Federal Reserve officials beginning in 2023 with the 18 members projecting six different levels of rates.

Chart_21-09-22_11-16-38

Gold had wild price variations and fluctuations with December 2021 futures trading from a low of $1764 60 to a high of $1788.40. As of 4:50 PM EDT gold futures are currently fixed at $1768.50. The chart included in this report is a simple three-minute line chart with gold pricing on the top and the dollar index below it. It is apparent the negative correlation between gold and the dollar was evident today. It is also clearly apparent extreme volatility was caused by today’s FOMC statement and press conference.

gold vs dollar

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

FOMC; Federal Reserve Policy Statement and Interest-Rate Projections

They will focus intently on the most recent Federal Reserve policy statement and the newly updated interest rate projections vis-à-vis the “dot plot” which will give projections through 2024.

The statement will give insight for one of the biggest questions that might be answered, whether or not the Federal Reserve will give clarity to the current proposed timeline and commencement date in which the Fed will begin to taper its monthly $120 billion asset purchases. Currently, the Federal Reserve purchases $80 billion of U.S. debt and $40 billion of MBS (mortgage-backed securities) every month.

During the banking crisis and subsequent recession of 2009, the Federal Reserve accumulated an asset balance sheet of roughly $4.5 trillion. At the end of their “quantitative easing.” (QE1 through QE4) they began to liquidate assets and took their balance sheet down to $3.75 trillion before they felt a further reduction would harm the economic recovery. This new round of “quantitative easing” has caused their balance sheet to exponentially swell, and as of September 15, the Federal Reserve has amassed $8.4 trillion in assets.

2005 to present fed balance sheet

Analysts are mixed as to whether they believe that the Fed will announce the start of tapering its asset purchases tomorrow. The majority of analysts currently believe an announcement will come in November, and tapering could begin as early as December 2021. However, the devil is in the details in that an announcement of a starting date to taper is only a component that market participants want and need to gain clarity on. It is also of interest how quickly they will taper and how much they will reduce their purchases monthly.

Recent statements by top Federal Reserve officials have clearly shown division between voting members as to when to begin the process of ending quantitative easing. A unanimous consensus will be difficult at best, however, if they come to a consensus and make an announcement tomorrow is that the start date that will result in bearish market sentiment for gold prices. Reciprocally if no announcement is forthcoming in either tomorrow’s Fed statement or Chairman Powell’s press conference which occurs roughly ½ an hour after the conclusion of the September FOMC meeting it will be interpreted as a much more dovish demeanor and therefore provide bullish tailwinds to take gold higher.

Chart_21-09-21_12-19-34

Just as important is the release of their updated interest rate projections. Not only will Powell give clarity as to when the Fed will begin to normalize rates, but it will also indicate the level of division between Fed officials. Lastly, it will be the first time that market participants gain clarity as to the interest rate projections for 2024.

While market participants may gain clarity as to the intentions of the Federal Reserve removing some of the uncertainty that currently exists, it will magnify the volatility in many financial markets as analysts glean the statement for changes from the previous FOMC statement looking for the nuances and phrasing of their current economic outlook.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Gold Recovers as Worldwide Equites Sell Off

The worldwide equity selloff began overseas and then continued into the U.S. equities markets. At its low today the Dow Jones industrial average was down 900 points before recovering. The Dow gave up 614 points in trading today and closed at 33,970.47, resulting in a net decline of 1.78%. The NASDAQ composite lost 2.19% and is currently fixed at 14,713.9030. The S&P 500 lost 1.70% and is currently fixed at 4357.73.

gold sept 20

As of 5:56 PM EDT gold futures basis, the most active December 2021 contract is currently up to $13.30 and fixed at $1764.70. Silver did sustain a mild selloff closing lower by 0.41%, and after factoring in today’s decline of a little over nine cents, it is currently fixed at $22.245.

silver sept 20

Reuters reported that “Wall Street plunged on Monday as fear of contagion from a potential collapse of China’s Evergrande prompted a broad selloff and sent investors fleeing equities for safety.”

They also added that “the equity selloff in the United States was a result of concerns of solvency of the Chinese property group Evergrande. “Gold rose on Monday as fears about the solvency of Chinese property group Evergrande sparked a flight to safe-haven assets, but gains were capped by strength in the dollar ahead of the U.S. Federal Reserve’s policy meeting. Spot gold rose 0.5% to $1,762.66 per ounce by 1753 GMT. U.S. gold futures settled 0.8% higher at $1,765.40.”

The Chinese property to developers has accumulated over $300 billion in debt mostly with the Central Bank of China.

The Federal Reserve will meet tomorrow and begin September’s FOMC meeting, which will conclude on Wednesday. Market participants and traders hope to gain more clarity as to the timeline in which the Federal Reserve will begin to taper their monthly asset purchases of $120 billion (80 billion in U.S. debt and 40 billion in mortgage-backed securities).

There is genuine uncertainty as to what actions the Federal Reserve will take in regards to their current monthly asset purchases. Their asset balance sheet has swelled to above $8 trillion in assets. However, their primary focus has been upon maximum employment, a major component of their dual mandate which is maximum employment and annual inflationary levels of around 2%. They have let inflation run much hotter in lieu of achieving their maximum employment goal. Believing that the majority of the current level of inflation is transitory, the Federal Reserve has let inflation run to 5.3%, based upon the latest CPI numbers released last week.

However, the most recent jobs report was extremely disappointing and deeply below expectations and forecasts from economists polled by the Wall Street Journal. The expectation was that the August jobs report would indicate an additional 700,000+ new jobs added to payrolls, and the actual number was a tepid 235,000 new jobs added last month.

The weak August jobs report will be weighed against the most recent report by the U.S. Census Bureau, which indicated robust consumer spending last month, resulting in $618 billion, up 0.8%. Economists polled were looking for August consumer spending to be down between -0.8 to -1.8. If you strip out consumer spending on automobiles and trucks, the actual gain for the month of August is 1.8%.

These two reports show an interesting mix between new jobs added and consumer spending. While the jobs report was disappointing and weak at best, consumer spending rose far past the expectations given by economists. Therefore, the Federal Reserve will be faced with making a decision based on strong consumer spending and weak growth in jobs. That will certainly influence their decision as to when they will begin to taper.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

 

Gold Struggles as Concerns about Upcoming FOMC Meeting Mount

Gold futures basis the most active December 2021 contract opened on Monday at $1790 and is currently fixed at $1753.90. Today gold continued its decline, although only fractionally, declining $2.80 on the day.

GOLD SEPT 17 for KITCO

Yesterday’s meltdown of $41 in gold was a partial result of dollar strength however, that was responsible for only a small component of the decline. The primary cause of yesterday’s tumble was a direct result of the U.S. Census Bureau’s monthly sales and food services report for August 2021. Analysts polled by various news sources had estimated that the report would show that retail sales had declined by a range of -0.8% to a decline of -1.8%. The actual numbers were the opposites of forecasts and predictions by economists.

The report showed that consumer spending increased last month by 0.7%, resulting in sales of $618.7 billion. A stronger indication of the robust retail sales in August can be seen if you strip out automobile and truck sales which would then result in consumer spending increasing by 1.8%. While the demand for automobiles and trucks was brisk it was supply limitations that those sales muted.

With the Federal Reserve set to begin their September FOMC meeting on Tuesday, September 21 the real question becomes how Federal Reserve members will interpret the recent data and their overall outlook of the economic recovery as it pertains to announcing when they will begin to taper their monthly asset purchases of $120 billion.

The data that they will be looking at is mixed. The jobs report for August came in exceedingly weak and well below expectations and forecasts by economists. Expectations for the U.S. Labor Department’s August jobs report were that 720,000 new jobs would be added to nonfarm payrolls. The actual report showed that only 235,000 new positions were added last month. Since the Federal Reserve has gone on record stating that maximum employment is their ultimate goal in their dual mandate which also includes keeping inflationary pressures around 2%. This should be the most important report when the Fed convenes next week to consider changes to their current monetary policy.

This week the Bureau of Labor Statistics released their current numbers on inflation, the CPI (Consumer Price Index). The report indicated an increase of 0.3% in August on a seasonally adjusted basis after rising 0.5% in July. This clearly illustrated that inflationary pressures have not abated significantly. The year-over-year inflationary rate did tick down from 5.4% to 5.3%. It must be noted that inflationary pressures above 5% are at their highest level since the recession of 2009.

The net result of all of the reports combined confirms that the U.S. economic outlook continues to contain an enormous amount of uncertainty. While the Delta variant of Covid 19 has begun to show declines in terms of daily cases reported in the United States. But there are still hotspots in the United States that are still rising at an alarming rate.

With a tepid August jobs report set against strong retail sales in August, Federal Reserve members have to face that economic growth is still coming in weaker than forecast but recovering nonetheless. This has put different Federal Reserve members divided as to when they will begin to taper their asset purchases. Chairman Powell did make a clear distinction between the timeline to initiate tapering and lift off of interest rate normalizations saying that the Federal Reserve has a different set of criteria for both of those components of their current extremely accommodative monetary policy.

According to MarketWatch, roughly half of the Federal Reserve’s 18 top officials support tapering “sooner than later.” However, “The other half of the Fed leadership have said they would like to see more data on the labor market before the threshold for tapering is met. They think it is still important to support demand in coming months as the economy regains its footing in the wake of the coronavirus.”

This puts Chairman Powell between a rock and a hard place to satisfy both the more hawkish and dovish top officials of the Federal Reserve. Even major analysts are divided on what they believe the Fed will announce next week regarding any guidance towards the onset of tapering. The only certainty that we know will emerge from next week’s FOMC meeting is an updated “dot plot,” which will include projected interest rates for 2024 for the first time.

Unmistakably this will be one of the most critical FOMC meetings this year in that it will give market participants a real glimpse further out in time than ever before.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Gold and Silver Battered after the Release of August 2021 Retail Sales

The report indicated an increase in consumer spending of 0.7%, totaling sales of $618.7 billion.

The report said that “Advance estimates of U.S. retail and food services sales for August 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $618.7 billion, an increase of 0.7 percent (±0.5 percent) from the previous month, and 15.1 percent (±0.7 percent) above August 2020. Total sales for the June 2021 through August 2021 period were up 16.3 percent (±0.5 percent) from the same period a year ago. The June 2021 to July 2021 percent change was revised from down 1.1 percent (±0.5 percent) to down 1.8 percent (±0.2 percent). Retail trade sales were up 0.8 percent (±0.5 percent) from July 2021, and up 13.1 percent (±0.7 percent) above last year. Clothing and clothing accessories stores were up 38.8 percent (±3.3 percent) from August2020, while gasoline stations were up 35.7 percent (±1.6 percent) from last year.”

This report had a huge impact on the market sentiment of gold, silver, and the dollar. The U.S. dollar index gained 0.36% and is currently fixed at 92.855. However, it was gold and silver pricing that got absolutely devastated in trading today. As of 5:00 PM EDT gold futures basis, the most active December 2021 Comex contract is down by $41, a drop of 2.26%, and fixed at $1753.80. Silver futures basis, the most active December 2021 contract lost $0.91 (-3.83%) and is currently fixed at $22.89.

Kitco silver chart

The shift in market sentiment is based on the belief that today’s strong retail sales numbers will strengthen the tapering narrative at this month’s FOMC meeting. The FOMC meeting will begin when the Federal Reserve members meet on September 21.

According to Reuters, Bob Haberkorn, senior market strategist at RJO Futures, said, “Gold has taken a pretty big hit, with the upside in the dollar and Treasury yields and the stronger data … you have longs running for the exit.” Haberkorn added that “Unless there is some geopolitical event or a Fed surprise, gold’s trajectory is unlikely to change going into the FOMC meeting.”

Our technical studies indicate that the first level for potential support in gold occurs at the 61.8% Fibonacci retracement, which is currently fixed at $1738.40, followed by the 78% retracement, which is currently fixed at $1712.80. The data set used to create the retracement begins after the flash crash that occurred on August 9 when gold traded to a low of $1678.10, up to the highs achieved on September 3 when gold peaked at $1836 per ounce.

gold Sept 16

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

 

Gold Fails to Hold the Key Psychological Level of $1800

Yesterday the Bureau of Labor Statistics released its inflationary report for August, indicating that the CPI (Consumer Price Index) increased by 0.3% last month. August’s rise in inflationary pressures came in under estimates by economists polled by the Wall Street Journal, who were expecting an increase of 0.4%. The Bureau of Labor Statistics report indicated that inflationary pressures are still prevalent and remain at an elevated level taking the CPI index to 5.3% over the last 12 months.

Today’s sell-off seems to have been the result of technical selling pressure. The fact that gold closed just under its 200-day moving average yesterday, which is the first level of technical resistance, and opened below that price point today was enough for short-term traders to take profit.

gold sept 15

Reuters reported that David Meger, director of metals trading at High Ridge Futures, said, “There weren’t any particular headlines to prompt gold’s pullback and this was rather due to its “technical inability to trade up through the 200-day moving average on Tuesday.” Meger added that, “any good news is bad news for gold,” and if more positive economic data comes out, the Fed would be more willing to begin reducing asset purchases, and gold’s likely to move sideways heading into the FOMC meeting.”

Gold continues to be range bound and could continue to trade sideways until the conclusion of the Federal Reserve’s September FOMC meeting on the 22nd of the month. Market participants are waiting for more clarity in regards to the Federal Reserve’s timeline to begin tapering. Currently, it is believed that the Fed will not announce when tapering will begin until the November FOMC meeting. One unique component market participants will focus upon and glean insight from this month’s FOMC meeting is the release of a revised “dot plot,” which will include anticipated interest rates (Fed funds rates) up to the year 2024.

Given that we did see gold give back gains from yesterday’s move above $1800, the risk to any major continuation of selling is limited. Analyst Ole Hansen of Saxo bank said, “Risk to the downside for gold is also limited since the slowdown in inflation thereby reduces the pace with which tapering can be carried out.”

The one thing that seems to be exceedingly clear is that traders and market participants are waiting for further information from the Federal Reserve when the FOMC meeting concludes exactly one week from today. Up until that point, we could see gold trade sideways and consolidate either just below or just above $1800 per ounce.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Gold Pops Breaking above $1800 Following a Slower than Expected Inflation Forecast

As of 4:25 PM EDT gold futures basis, the most active December 2021 Comex contract is currently up $12.70 and fixed at $1807.10. Today’s moderate price advance taking gold above $1800 per ounce is a direct result of a government report indicating that the CPI (Consumer Price Index) showed that inflationary pressures contracted fractionally in August.

chart for Kitco gold sept 14

In a News Release from the Bureau of Labor Statistics, the government released its most current inflationary numbers for August 2021.

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in August on a seasonally adjusted basis after rising 0.5 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 5.3 percent before seasonal adjustment. The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0 percent, mainly due to a 2.8-percent increase in the gasoline index. The index for food rose 0.4 percent, with the indexes for food at home and food away from home both increasing 0.4 percent.”

The inflation numbers released today were below the forecast of 0.4% by economists polled by the Wall Street Journal. However, the increase of 0.3%, clearly indicates that inflationary pressures are still at the highest levels in the last 10 years. The current rate of inflation over the last year had a slight downtick from 5.4% in July, to the numbers released today taking the inflation rate over the last year down to 5.3%.

This report pressured the US dollar lower, with the dollar index currently fixed at 92.625 after factoring in today’s decline of -0.03%. However, it was not so much the fractional decline of dollar value but the reaction by market participants as it pertains to the future actions of the Federal Reserve. Specifically, it eases the potential for the Federal Reserve to begin to taper its monthly asset purchases later rather than sooner.

According to Reuters, “Gold hit a one-week high on Tuesday, as the dollar retreated after a slower-than-expected rise in U.S. inflation led to uncertainty over the U.S. Federal Reserve’s timeline to taper monetary stimulus.”

Market sentiment currently is leaning towards the belief that the Federal Reserve will announce when it will begin to taper in November. However, the September FOMC meeting will conclude with the Fed releasing its most current “dot plot” which will include/add their assessment for interest rate values in 2024. In an interview with Reuters Suki Cooper, precious metals analyst at Standard Chartered Bank said, “While a tapering announcement is unlikely until the November FOMC meeting, the September meeting will introduce the staff forecasts or ‘dots’ for 2024. The 2024 dots could mirror 2023’s two rate hikes.”

As such we could expect to see gold continue to rise over the next couple of months. Our technical studies indicate that current resistance resides first at $1809, gold’s 200-day moving average, and $1815.70 gold’s 100-day moving average. Major resistance occurs at $1837, which is the intraday high achieved on September 3.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

 

The Fed and Market Participants Await the Release of Key U.S. Economic Data

The dual mandate of the Federal Reserve continues to focus upon maximum employment and inflationary pressures. The economic data from both the U.S. Labor Department’s jobs report, as well as inflationary measures such as the CPI, and PCE (the preferred inflationary index the Federal Reserve uses) are integral components used in the decision-making process of the Federal Reserve.

In early September the U.S. Labor Department released the jobs report for new nonfarm payroll jobs added in August. The numbers released by the Labor Department were extremely disappointing coming in well under expectations. Estimates for new jobs added from economists polled by Dow Jones predicted that there would be 720,000 new jobs added last month. The actual numbers were that only 235,000 new jobs were added last month, a huge miss by economists, and a low number by anyone’s standards.

CNBC reported on September 3 that, “August’s total — the worst since January — comes with heightened fears of the pandemic and the impact that rising Covid cases could have on what has been a mostly robust recovery. The weak report could cloud policy for the Federal Reserve, which is weighing whether to pull back on some of the massive stimulus it has been adding since the outbreak in early 2020.”

Since the Federal Reserve has pivoted its focus away from inflationary pressures with its primary focus upon maximum employment tomorrow’s inflationary report is important, however, the disappointing jobs report will be of primary concern.

With that in mind inflationary pressures are still a major concern to Americans who continue to pay higher prices for many goods and services. But economists have forecast that on average the expectations are that there will be a 0.3% increase in the core CPI reading from August.

According to Bloomberg News, “August data due Tuesday is set to show annual growth in U.S. consumer prices stayed above 5% in August for a third straight month, according to Bloomberg surveys. The median forecast was 5.3%. Most other developed countries have seen a spike too — just not nearly as big.”

Bloomberg also reported that the “N.Y. Fed Says U.S. Consumers Expect 4% Inflation to Stick Around. Inflation expectations among U.S. consumers over the medium term rose to the highest level on record in the Federal Reserve Bank of New York’s surveys, according to the latest edition published Monday. Consumers said they expect inflation at 4% over the next three years, up 0.3 percentage point from a month earlier.”

Gold futures basis the most active December 2021 Comex contract gained three dollars in trading today and is currently fixed at $1795.10. It briefly tested $1800 when it traded to an intraday high of $1800.20 before backing off.

gold Sept 13

Carsten Fritsch, an analyst at Commerzbank wrote that “For now, traders appeared to be positioning themselves in preparation for the August U.S. Consumer Price Index, or CPI, reading due Tuesday. MarketWatch reported that he tempered his statements saying that he expects inflation to come near July levels and therefore is “likely to provide arguments for the Fed to begin withdrawing its bond purchases before the year is out.”

Since the current Fed mandate looks at both maximum employment and inflationary pressures to determine changes in their current monetary policy, many economists believe that dollar strength, as well as a potential rise in Treasury yields, could continue to stifle any major upside move in gold pricing.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Interest Yields, the Dollar, and the Federal Reserve

On a weekly chart, the prior four weeks have all resulted in a green candle (Friday’s close is above the opening on Monday), with higher closes when compared to the close of the prior week. That trend ended this week with the first instance of a lower close on a weekly chart compared to the preceding week. This week’s weekly candle also contained a lower high and a lower low when compared to the prior week.

gold sept 10

One factor which has pressured gold lower has been dollar strength. Over the last three trading days, the dollar index has challenged its 50-day moving average. Today the closing price of the dollar index and the 50-day moving average are both at 92.65. Dollar strength peaked in the middle of August when on an intraday basis, the dollar traded to 93.745. That was followed by two weeks (10 trading days) which took the dollar index to 91.81 before recovering.

The recovery was short-lived, at least for now when on Wednesday the dollar traded to a high of 92.854 and then closed lower on Thursday. Today the dollar traded to a lower low than the last two previous trading days and as we mentioned, closed exactly at its 50-day moving average. Our technical studies indicate that there is resistance at 92.75, the 23.6% Fibonacci retracement, as well as Wednesday’s intraday high of 92.85.

usdx sept 10

Another factor that has placed significant pressure on gold has been rising yields in U.S. treasuries. Today all U.S. debt yields rose as a result of a report showing that the U.S. wholesale inflation index diminished slightly in August. Also, the U.S. producer price index data indicated an increase of 0.7% in August. However, it must be noted that inflationary pressures continue to remain high. Currently, the 10-year Treasury note is yielding 1.341%, up 0.041% today.

Lastly and possibly the most significant force pressuring gold prices recently is the upcoming FOMC meeting scheduled to begin on September 21. Today the Wall Street Journal reported that “Fed Officials Prepare for November Reduction in Bond Buying.” The article starts by stating, “Phasing out the Fed’s pandemic-era stimulus by the middle of 2022 could clear the path for an interest-rate increase.”

Federal Reserve members will attempt to come to a unified agreement regarding the timeline to begin to taper their asset purchases, as well as a designated dollar amount of the reduction of their monthly purchases now totaling $120 billion of U.S. Treasuries and mortgage-backed securities.

However, most analysts, including those in the Wall Street Journal, believe that tapering could be as early as November. Nick Timiraos, a reporter at the Wall Street Journal today, wrote, “Many of them have said in recent interviews and public statements that they could begin reducing, or tapering, their $120 billion in monthly purchases of Treasuries and mortgage-backed securities this year. While they are unlikely to do so at their meeting on Sept. 21-22, Fed Chairman Jerome Powell could use that gathering to signal they are likely to start the process at their following session, on Nov. 2-3.”

With just under two weeks before the Federal Reserve convenes for the September FOMC meeting, speculation will continue to guide the future direction of gold as well as U.S. equities. Of all of the issues which have pressured gold recently, the upcoming decision of the Federal Reserve seems to be the predominant factor guiding the assumptions made by analysts.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Gold Has Modest Recovery, Closing at $1800 in New York

As of 5:10 PM EDT gold futures basis, the most active December 2021 Comex contract was trading up $2.80 (+0.16%) and fixed at $1796.30. The precious metal traded to a high today of $1803.40 and a low of $1785.10. This is the first instance in the last three trading days in which gold has closed higher when compared to the previous day and traded to a higher low but a lower high.

gold Sept 9

Silver futures basis the most active December contract traded fractionally higher, gaining approximately $0.03 (+0.12%) and is currently fixed at $24.085.

silver sept 9

The modest recovery in gold and silver was largely a result of dollar weakness. The U.S. dollar index is currently fixed at 92.49 after factoring in today’s decline of -0.17%, or 16 points. However, gold prices declined fractionally for those using other currencies, specifically the Euro, which had fractional gains after the European Central Bank announced that it would slow down its current pace of asset accumulation (Euro bonds).

USDX sept 9

According to Reuters, “Gold firmed on Thursday, lifted by a slight retreat in the dollar, but renewed bets that the U.S. Federal Reserve may start early tapering of economic support capped gains, with the European Central Bank also slowing its bond-buying.”

Last Friday’s jobs report for the month of August came in exceedingly below expectations (economists predicted that over 700,000 jobs would be added to August payrolls), CNN reported that only 235,000 jobs were added back to the economy last month. However, the U.S. weekly jobless claims came in near an 18-month low. This could persuade the Federal Reserve to announce tapering their asset purchases before the end of the year.

Ed Moya, a senior market analyst at foreign exchange brokerage Oanda, told Reuters that, “U.S. weekly jobless claims data came in at near 18-month lows, which cements the belief that a December (Fed) taper announcement was possible. … So, gold prices are going to consolidate around these levels.” He added, “The increased likelihood that the ECB may start reducing stimulus at some point next year drove gold’s initial decline back below $1,800 per ounce.”

When the Federal Reserve meets on September 21 for the next FOMC (Federal Open Market Committee) meeting, they most certainly will take into account the weak jobs report from August and the current state of the Delta variant as it pertains to slowing down the economic recovery in the United States.

According to CNN, “Covid-19 cases have been on the rise in much of the U.S., and the rise in hospitalizations continues in hotspots throughout the country. Children now represent more than a quarter — or 26.8% — of weekly Covid-19 cases nationwide.” Today it was reported that in the United States, there were 104,887 new confirmed cases, taking the daily average to 151,816. This recent surge in new cases prompted President Biden to address the nation, outlining a six-step plan to get the pandemic under control.

Because the pandemic is still impacting our economic recovery, it will be a major subject discussed during the next FOMC meeting.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

 

Gold Trades Lower for a Second Consecutive Day but Does This Match Up to the Current Events

As of 5:05 PM EDT gold futures basis, the most active December 2021 Comex contract is trading down $7.80 and fixed at $1790.70. Considering the major new stories of the day it seems a little peculiar that gold would continue to trade under pressure. The following are some of the key events that occurred today.

gold sept 8

From Reuters;
Reactions to ECB strategy review.

“The European Central Bank set a new inflation target on Thursday after an 18-month strategy review, hoping to bolster its credibility after undershooting its current objective for nearly a decade.”

Comments from analysts on ECB’s strategy review announcement. Christoph Rieger, Head of rates and credit research at said, “The inclination to tolerate higher inflation is deeply rooted in the ECB’s thinking. They are stressing the importance of having an inflation buffer … The bottom line is that real yields have hit record lows and that will continue.”

The ECB’s ‘phantom taper’?

– “We’ve had ‘taper tantrums’ and even ‘dovish tapers’, but the European Central Bank may deliver a taper that’s not really a taper at all.”

U.S. job openings hit record high as employers struggle to find workers

– “U.S. job openings raced to a new record high in July while layoffs rose moderately, suggesting last month’s sharp slowdown in hiring was due to employers being unable to find workers rather than weak demand for labor.”

Dollar pares gains on dovish Fed speak, before ECB meeting

– “The dollar pared gains on Wednesday as Treasury yields dipped after a Federal Reserve official offered a dovish outlook on the economy, and a day ahead of a European Central Bank policy decision … New York Fed Bank President John Williams said that more progress is needed in the labor market to achieve the “substantial further progress” for the Fed’s maximum employment goal.”

From Market Insider;
Delta variant concerns contribute to weakness on Wall Street
(RTTNews) – “The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, said the deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most districts. The deceleration in those sectors reflected safety concerns due to the rise of the Delta variant of the coronavirus, and, in a few cases, international travel restrictions.”

From Politico;

“Yellen warns of likely October debt cliff and incoming ‘irreparable damage’

“Treasury Secretary Janet Yellen warned congressional leaders on Wednesday that she expects the country’s debt limit will hit its breaking point next month, dealing a likely blow to the global economy without quick action.”

All of these articles are news stories written today for the most part represent dovish sentiment both from the European Central Bank and the Federal Reserve. Coupled with the fact that Friday’s jobs report was tepid at best with the actual numbers coming in well below estimates by major analysts polled by both Dow Jones and Bloomberg. With these things taken into consideration it seems unusual that the safe-haven asset, gold has reacted to the news by trading lower.

Jim Wyckoff, Senior Market Analysts and Columnist put it very succinctly in his article in Kitco news today saying, “The safe-haven metals bulls are stymied this week by the fact gold and silver prices have sold off in the face of some heightened risk aversion.”

Rather than making any judgments, I invite you the reader to look at the headlines and ask yourself if the recent fundamentals events and stories match recent price action in gold.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Gold Tumbles after Last Week’s Dramatic Rise

Economists polled by Dow Jones and Bloomberg were anticipating that there would be an additional 700,000 to 750,000 new jobs added last month. However, the actual numbers came in far below the estimates, with the U.S. adding only 374,000 nonfarm payroll jobs in August.

This disappointing number compared to the estimates meant that the Federal Reserve would probably maintain its accommodative monetary policy. Their dual mandate of inflationary rates around 2% and full employment has shifted, favoring full employment while letting inflationary rates run hot. This put pressure on the U.S. dollar and concurrently was a major factor in taking gold moderately higher.

While the Federal Reserve had anticipated the onset of tapering their $120 billion monthly asset purchases as soon as November or December, the disappointing jobs report made it plausible that if they do taper, it will be at a slower pace, or they could wait until the beginning of next year to initiate the process.

Besides a disappointing jobs report, there was the real concern of the Delta variant infecting record numbers of Americans. MarketWatch reported that “U.S. COVID-19 case tally tops 40 million, and hospitalizations over Labor Day holiday were more than double last year’s.”

Currently, there have been more than 221 million confirmed cases of the coronavirus globally. However, the United States continues to have the largest case count. According to the New York times, tracker United States is averaging more than 1500 deaths daily, this for the first time since March.

The Financial Express summarized Friday’s fundamental basis for gold moving higher, saying that, “The Fed has made a labor market recovery a condition for paring back its pandemic-era asset purchases and with the current data, the expectation is that start of tapering assets may begin early next year instead of December. Americans have become reluctant to return to the workforce for fear of infection, and August jobs data reflects that.”

However, even with a disappointing jobs report and a rise in reported cases of Covid 19, gold prices fell sharply today, giving up $37.90, just over a 2% price decline. Gold futures basis the most active December 2021 Comex contract is currently fixed at $1795.90. Current pricing is just above the intraday low of $1793.70 and far below today’s intraday high of $1833.50.

Gold F Sept 7

Dollar strength certainly was a component of today’s sharp selloff in gold. The dollar gained 0.56 and is currently fixed at 92.545. Rising yields in U.S. debt instruments were also cited as a key component creating bearish sentiment in gold pricing today.

USDX sept7

However, collectively both dollar weakness and higher yields in U.S. debt are not enough to account for the dramatic 2% fall in gold pricing. Many analysts are citing the fact that when gold was unable to trade and close above $1830, it set into motion long position liquidation and profit-taking from short-term futures traders as a key component to today’s dramatic selloff.

On a technical basis, it is critically important that gold remains at or above the current 50-day moving average, fixed at $1797. With current pricing at $1796.10, it is at a critical price point. A break below this price point would mean that gold could fall to the next support level at $1781, the intraday low achieved on August 26. Resistance is again based upon both the 200-day and 100-day moving averages, which occur at $1810 (200- day) and $1814.80 (100-day).

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

Jobs Report is Something the Feds Will Have to Factor into their Monetary Policy

It clearly shows that the economic recovery, which had been strong, has taken at least one or two steps backward. This is directly due to the onset of the delta variant, which is much more transmissive has now encompassed the globe affecting millions upon millions of lives.

Just when we thought that we were viewing the end of the tunnel and moving towards a post-pandemic normal, the delta variant has dramatically altered the reality of that coming to fruition. Currently, the United States is reporting over 150,000 new infections daily, and other countries are also experiencing tremendous upticks in their infection rate.

It has taxed the hospital’s putting them at full capacity regarding the number of ICU beds they have. It has changed the newfound optimism as we believed we were pretty much through this crisis now to realize that it will linger for much longer than we anticipated.

The loss of lives and the hardships of individuals worldwide are truly disheartening. Helping to mitigate any economic implications is what the Federal Reserve is focusing upon. The only way they can help end the suffering is by assuring a strong economic recovery. Today the U.S. Labor Department reported that only 235,000 jobs were added in August 2021, exceedingly below expectations of economists polled by Dow Jones, which believed the actual number would be closer to 700,000. A Bloomberg survey indicated that there would be an additional 750,000 jobs added last month.

These tepid numbers indicate that the delta variant has had a profound impact on economic growth in consumer demand. More Americans have become reluctant to return to the workforce for fear of infection. The U.S. had been on a path for a strong recovery as 17 million individuals (76%) of the 22.4 million jobs lost have now been filled. This means that the United States still needs to fill over 5 million jobs lost during the pandemic.

Before the delta variant, economists had forecast that there would be an additional one million Individuals added monthly to the job force, which is now in question.

This is more than a minor setback with such dramatic repercussions that it has to affect the current monetary policy adjustments that the Federal Reserve anticipated that they could begin to implement later this year. This includes their announcement to reduce its quantitative easing, which has been purchasing $120 billion monthly broken into two components; $80 billion each month is spent on treasuries, with the remaining $40 billion allocated to each month to purchase mortgage-backed securities. The Federal Reserve’s dual mandate has put its primary focus on maximum employment and is committed to being data-dependent before enacting any major changes.

Possibly the most alarming aspect of this latest news is that many Americans had believed that we were moving towards the end of the pandemic and moving to a post-pandemic reality. The stark reality is that we have been witnessing light at the end of the tunnel when in reality, we were completely unaware that as one tunnel ends in the case of the pandemic, another tunnel appears.

gold 93

This jobs report was an extremely bullish factor for gold futures taking the precious yellow metal $18.40 higher, with the December 2021 contract currently fixed at $1829.90. But the most profound effect that this report revealed is that the Federal Reserve will have to hold the current plans to normalize their asset purchases by tapering and cement their conviction to leave interest rates near zero for quite some time in the future. These factors have will an extremely bullish impact on the safe-haven asset gold for multiple reasons, which we will detail and discuss in our daily commentary next week.

gold 2

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Wishing you, as always, good trading and good health,

Gary Wagner

Countdown to Jobs – A Key Component in Shaping the Feds Tapering Timeline

It will be the last report the Federal Reserve will use to determine their monetary policy at this month’s FOMC meeting.

Forecasts from economists believe that the U.S. Labor Department is expected to report that the economy generated 720,000 new jobs in August. These figures include employment in local, state, and federal jobs. If the actual numbers come in close to or above the forecast, it will give hawkish Federal Reserve members the most recent economic data to make their case. The last jobs report was exceedingly strong as the Labor Department reported that 943,000 new jobs were added in July.

According to MarketWatch, “Another strong report could nudge the Federal Reserve to move up its plans to start unwinding its easy-money strategy meant to prop up the economy. The central bank has said it plans to do so before the end of the year.”

This report comes on the heels of yesterday’s ADP private-sector jobs report, which anticipated that there would be an additional 600,000 jobs added last month, according to economists polled by Dow Jones. However, the actual numbers were disappointing and far below the estimates. The ADP report yesterday shows that payrolls had gained 374,000 individuals.

As reported by CNBC, Mark Zandi said, “The delta variant of COVID-19 appears to have dented the job market recovery. Job growth remains strong but well off the pace of recent months. Job growth remains inextricably tied to the path of the pandemic.”

Analysts point to the fact that the numbers released by ADP could be pointing to a softer Labor Department report with the caveat that the ADP count has been an unreliable indicator in 2021 as it pertains to the Labor Department’s report. One example is the July reports in which ADP reported an additional 326,000 individuals added to payrolls, with the Labor Department reporting that 943,000 jobs were added.

CNBC also cited an analyst at Goldman Sachs, saying that “the ADP report suggests potential downside for Friday’s Bureau of Labor Statistics number. Goldman already is forecasting below-consensus payroll growth of 600,000.”

Also, Nela Richardson, chief economist at ADP, spoke to CNN Business reporters, saying, “Our latest report suggests that the labor market recovery has downshifted… Increased spread of the virus might again keep people from returning to work.” Suggesting that “the final estimate of job gains for August will likely fall short.”

The importance of tomorrow’s jobs report cannot be underestimated in that it is the last employment or important piece of data that the Federal Reserve will have ahead of the September FOMC meeting. Regardless of the Labor Department’s jobs report tomorrow, it is clear that if the numbers come in at current forecasts, it would create additional bearish market sentiment for the safe-haven class, and therefore gold. At the same time, if it comes in well under forecasts as some analysts anticipate, it would provide strong bullish tailwinds for gold to move higher. It would continue to pressure Federal Reserve members to expand their time frame to begin tapering their monthly asset purchases.

Reuters put it systemically in a report published today. They summarized recent statements by Fed members including Chairman Powell and its effect on the dollar and the timeline the Fed will introduce to begin to taper. “The dollar has been on the defensive over the past couple of weeks as doubts have crept in about when the Federal Reserve will start unwinding its stimulus. Last Friday, Fed chair Jerome Powell said that the jobs recovery would determine the timing of asset purchase tapering. Dovish comments from Powell and other Fed policymakers in addition to data misses have seen the greenback index lose around 1.4% versus a basket of currencies since hitting nine-month highs on Aug. 20.”

As of 3:57 PM, EDT gold futures continue to trade above $1800 per ounce, basis most active December 2021 Comex contract is down $3.80 and fixed at $1812. with the most recent bias indicating a sideways trading range as market participants await tomorrow’s jobs report release.

gold Septmember 2

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Wishing you, as always, good trading and good health,

Gary Wagner

 

Gold Remains Above Key and Critical Short-Term Support but It Is the Release of Friday’s Jobs Report that Will Shape the Future Direction of Gold

The clear break in gold occurred on Friday after Federal Reserve Chairman Jerome Powell spoke at the virtual Economic Symposium. Last Friday’s dynamic surge in gold took the precious yellow metal from its opening price of $1795 top close at approximately $1820. This single-day move took gold pricing above its 100 and 200-day moving averages. During the same period, gold’s 100-day moving average crossed above the longer-term 200-day moving average.

gold sept 1

Gold continues to hold its ground considering the strong gains in U.S. equities with the NASDAQ composite, closing at a new record high today. The NASDAQ composite gained 50 points which is an increase of 0.33% and closed at 15,309.3812. The S&P 500 closed at a record high on Monday and is currently trading a few points below Monday’s record close.

nasdaq

Dollar weakness has certainly aided in gold’s stable performance. Now for the fourth consecutive day, the dollar has closed lower when compared to the previous day. Today the U.S. dollar index lost 12 points and is currently fixed at 92.515.

usdx sept 1

As of 5:55 PM EDT gold futures basis, the most active December 2021 Comex contract is fixed at $1816.30 after factoring in today’s fractional decline of $1.80. However it was silver that had a strong advance just shy of 8/10 of a percent, and after you factor in today’s $0.19 gain the December contract of silver is currently fixed at $24.195.

The next report that market participants along with the Federal Reserve will use to determine whether or not the economic recovery in the United States is slowing is Friday’s job report. This will help shape or determine the future course of the Fed’s monetary policy as it will have the most recent data indicating whether or not the economic recovery continues to pick up steam, or whether it is contracting due to the Delta variant of the Covid-19 virus.

Today ADP released its private-sector employment data which came in disappointingly below the economist forecast polled by Dow Jones. Estimates for today’s ADP report were that there would be 600,000 new private-sector jobs in August. However, the report indicated that only 374,000 new jobs were added last month. The question becomes whether or not the ADP’s private-sector report is a precursor to a disappointing Labor Department jobs report which will come out on Friday. Typically ADP jobs report cannot be directly correlated to the US Labor Department’s report.

According to CNBC, “U.S. companies created far fewer jobs than expected in August as the Covid resurgence coincided with cutbacks in hiring, according to a report Wednesday from payroll services firm ADP. Private payrolls rose just 374,000 for the month, well below the Dow Jones estimate of 600,000 though above July’s 326,000, which was revised downward slightly from initial 330,000 reading.”

If the Labor Department report comes in under current economic predictions it could have very bullish undertones for gold, and bearish undertones for the dollar. This is because the Federal Reserve’s mandate of maximum employment is the main criteria that the Federal Reserve is currently looking at to guide their future actions in regards to the onset of tapering as well as when they will raise interest rates.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health.

Gary Wagner

 

Buy when the Big Boys Buy, and It Seems Some of the Big Boys Are Buying Gold

The shift I am referring to is that the most recent report derived from data collected for the week of August 24 clearly showed that money managers have been positioning themselves based on the assumption that gold is moving higher. Currently, the collective positions of money managers are holding 126,636 net long contracts. Concurrently the number of short positions has been diminishing. The recent increase of net long positions in gold resulted in an increase in their holdings by almost 30%.

August 21 gold

One factor that has led to this shift in market sentiment by money managers is the unknown effect of the current Delta variant in regards to slowing down the economic growth in the United States. The surge of new infections predominantly due to the Delta variant of the Covid 19 virus has resulted in more than 155,000 new cases per day. More alarming is that the death count has now exceeded 1100 souls losing their lives each day in the United States. According to the New York Times tracker this is an increase of 91% compared to data accumulated two weeks ago.

The vast majority of those new cases (approximately 90%) come from a much younger demographic that is largely unvaccinated. The good news is that it has been reported that vaccine hesitancy has fallen to its lowest level since the onset of the pandemic. According to a recent poll by Axios/Ipsos the number of individuals to (20%), who said they were not very likely (6%), or not likely at all (14%), has diminished from 34% in March, down

However, according to one of the largest hedge fund managers, rising inflation will be the overwhelming factor taking gold higher. American billionaire John Paulson who made $4.9 billion using credit default swaps to effectively bet against the U.S. subprime mortgage lending market in 2010, has been a steadfast gold bull, accumulating large holdings of the precious yellow metal during the U.S. housing crisis.

gold 3 line break chart

In an interview with Bloomberg TV today and reported by Yahoo News, “John Paulson warns that inflation could spiral out of control. The asset that he believes is poised to take the spotlight is gold… the Fed has had the printing press turned on, and the money supply is pointing toward rising inflation.”

Unquestionably recent data from the commitment of traders’ report coupled with John Paulson’s interview today has revealed that major hedge fund and money managers are increasing their holdings of gold assets and accumulating large positions in gold futures. The adage to “buy when the big boys buy” is based on the belief that the large professional investors seem to be a step ahead of the investment community when it comes to market sentiment and, as such, could contain extremely insightful information.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health.

Gary Wagner

 

Both Gold and Silver Have Slight Corrections Following Friday’s Dramatic Gains

There he indicated that the Federal Reserve had changed their demeanor to a more dovish stance concerning the onset to taper their monthly $120 billion asset purchases of U.S. Treasuries ($80 billion) and MBS or mortgage-backed securities ($40 billion). However, it was the key distinction that Chairman Powell made between the criteria needed to begin the tapering process and the criteria needed to raise interest rates.

As of 5:15 PM EDT gold futures basis, the most active December 2021 Comex contract is fixed at $1812.70, after factoring in today’s net decline of $6.80 (-0.37%). Silver futures basis the most active September 2021 Comex contract is fixed at $24.015, after factoring in today’s decline of $0.047 (-0.20%).

silver August 30

Gold’s trading range was interesting in that the intraday high of $1828.50 occurs within $0.20 of the 38% Fibonacci retracement at $1826.30. The intraday low occurred at $1810, which is just at both the 100-day moving average and the 200-day moving average. On a technical basis, it is not a far stretch to see these two price points as key and areas of short-term support.

Gold August 30

A break above $1826 to $1834 (the highs gold traded to in August) would indicate a continuation of the bullish momentum that began after the flash crash took gold prices to $1677. For the most part, gold has completely recovered from those price declines witnessed a few weeks ago. Our technical studies also indicate that there should be major support for gold at $1793.40, which is the current fix of gold’s 50-day moving average. A break below that price on a closing basis would negate the bullish market sentiment achieved in the recent run-up in pricing.

While the commitment of traders (see commentary below) indicates an increase of bullish market sentiment by money managers, market participants are awaiting the jobs report from August, which will be released this Friday, September 3. Currently, economists polled by Dow Jones estimate that the August report will show an additional 600,000 jobs were added this month. However, that is roughly 2/3 of the new nonfarm payroll jobs added in July. It is this number that is being factored into current pricing. If the actual numbers come in well above or below economists’ forecast, we could see a rebalancing as market participants incorporate the real-time data into their market sentiment.

COT (Commitment of Traders) Report
Today, Neils Christensen, editor at Kitco News, reported on Friday’s COT report, which always lags one week behind the real-time numbers. He wrote, “The CFTC disaggregated Commitments of Traders report for the week ending August 24 showed money managers increased their speculative gross long positions in Comex gold futures by 9,364 contracts to 126,636. At the same time, short positions fell by 7,002 contracts to 51,192. Gold’s net length now stands at 75,444 contracts, up nearly 28% from the previous week. Renewed interest in gold helped push prices back above $1,800 an ounce during the survey period.”

The Delta variant continues to infect Americans at an alarming rate, with many hospitals in the states containing low vaccination rates. This has put a tremendous strain on their healthcare system, with many hospitals running out of ICU beds. As of Friday, August 27, there were over 150,000 new cases of the Covid 19 virus. The vast majority of those in the hospital (approximately 90%) are individuals that did not receive the vaccine. More alarming is that the largest percentage of new infections is occurring with a much younger age group than the first major wave of the pandemic.

This recent surge in new cases is the greatest unknown as to how it will affect the economic rebound in the United States that has been occurring over the last three months.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health.

Gary Wagner

Powell Speech Pleases Investors of Both Risk-on and Safe-Haven Asset Classes

Traders and market participants have awaited his speech to glean more insight into the current sentiment of the Federal Reserve as it pertains to their highly accommodative monetary policy. The tone of his prepared remarks was construed as being more dovish than last month’s FOMC meeting.

gold August 27

Towards the end of his prepared speech, Chairman Powell said, “That brings me to a concluding word on the path ahead for monetary policy. The Committee remains steadfast in our oft-expressed commitment to support the economy for as long as is needed to achieve a full recovery. The changes we made last year to our Statement on Longer-Run Goals and Monetary Policy Strategy are well suited to address today’s challenges.”

The net effect on U.S. equities and the precious metals was strong upward moves in both asset classes. The NASDAQ composite closed at a new record high gaining 183 points and closing at 15,129.5011. The same is true for the S&P 500, which gained 39.37 points (+0.88%) and closed at an all-time high of 4509.37. Although the Dow Jones industrial average gained 242.68 points, a net gain of +0.69%, it did not break its record high which occurred earlier in August.

Gold basis the most active December 2021 Comex contract had a significant gain of 1.41%, a total of $25.30 and closed above the key psychological level of $1800 per ounce. Gold closed out the week at $1820.50, just off the intraday high achieved at $1821.90. Powell’s words contained the right tone and timbre to satisfy investors and market participants.

gold August 27

There were two main takeaways to Chairman Powell’s speech today. The first the Federal Reserve still considers recent spikes in inflation for the large part as transitory. The second major take away was that although he said that they are not far from tapering their $120 billion monthly asset purchases, he made a big distinction between the beginning of tapering and a timeline for the onset of interest rates hikes.

Distinguishing between the timeline to taper and timeline to raise rates was made exceedingly clear when Chairman Powell said “The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test. We have said that we will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2 percent and is on track to moderately exceed 2 percent for some time. We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis.”

His speech cleared the way for both gold and silver prices to have substantial gains over the upcoming weeks. The next major data set that market participants will focus upon will be the U.S. Labor Department jobs reports for the month of August. This will be the key report that Federal Reserve members will look at when they convene at the September FOMC meeting.

silver August 27

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Wishing you, as always, good trading and good health.

Gary Wagner