Gold News

Gold Holds Onto Gains Despite Healthy US Economy Increasing Chance of Fed Hikes

Gold starts a new week trading at around $1,775 an ounce as investors assess the likely trajectory of the Federal Reserve’s interest rate hikes in the wake of the positive jobs data released at the end of last week. The figures showed the US had added double the number of jobs that was anticipated, giving the Fed greater scope to increase its series of interest rate hikes as it tries to curb inflation without risking tipping the economy into recession. While gold did drop a little on Friday in the wake of this news, it has largely held on to the gains it has made since late July, illustrating that support for the precious metal is strengthening. As such with gold’s upside gains capped by the potential of more aggressive rate hikes by the Fed and other central banks across the world, there now appears to be sufficient support to prevent the price falling to the $1,700 an ounce level seen in July. How strong that support proves to be will be tested when the Fed’s next interest rate decision is announced at the end of this month. Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience inwriting about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewableenergy and the challenges of avoiding greenwash while investing sustainably. This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

Rupert Rowling
Rupert Rowling

08/08/2022

Gold Challenges $1,800 as Rising US-China Tensions Boost Metal’s Haven Appeal

Gold is ending the week trading close to $1,800 an ounce as the precious metal has found support from rising tensions between the US and China following Nancy Pelosi’s visit to Taiwan as well as fears that major economies are facing recession. Yesterday brought confirmation that the Bank of England would indeed raise its benchmark rate by 50 basis points but rather than this prove a negative for gold as rising interest rates typically are, the supporting commentary was the focus with the central bank painting a pretty pessimistic picture of the country’s economic outlook. Across the Atlantic the rhetoric remains very hawkish with Cleveland Federal Reserve Bank President Loretta Mester reiterating the bank’s commitment to bringing inflation down which may require interest rates to be raised above 4%. Today’s release of the latest US jobs data will provide the latest indicator of the health of the US economy with the expectation that for now at least the employment picture remains positive. This will give the Fed further scope for future rate rises without risking tipping the economy into recession. In such an environment gold’s upside gains are likely to be capped with $1,800 an ounce an obvious near-term resistance level. Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience inwriting about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewableenergy and the challenges of avoiding greenwash while investing sustainably. This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

Rupert Rowling
Rupert Rowling

05/08/2022

A Bottom may be Forming in the Precious Metals Sector

HUI: SPX Ratio The chart below shows the HUI: SPX ratio, where HUI is the Amex Gold Bugs Index 14 major gold-producing companies, and the SPX represents the S&P 500 stock market index. The price of gold is shown by the black line, with the data recorded from the year 2000.  The only time mining stocks have been cheaper relative to the stock market was in late 2000, when the secular precious metals bull market was emerging. Since late 2015, when the ratio fell to its current level, the mining stocks and precious metals have been in an uptrend, albeit with a high degree of volatility. What also stands out in the chart is that the spread between the price of gold and the HUI: SPX ratio is considerably wider now than it has been at any time going back to at least 2000. For me, this suggests that not only might a bottom be forming, but any move higher has a strong possibility of sustainability. A Bottom in the Gold Market? The rallies in the sector since late 2015 have been relatively short in duration - six months in 2016 and twenty-two months from late 2018 to August 2020. By "sustainability," I mean a bull move that lasts at least three years, like the ones from 2001-2004, 2005-2008 and 2008 to 2011. I’ve received many emails on the question of whether people should be selling, hedging or holding at the moment. I have been struggling with that dilemma ever since I sold a big position in NUGT puts. Direxion Daily Gold Miners Index Bull 2X Shares (NUGT) is a leveraged exchange-traded fund (ETF), I was using to hedge at the end of April. While I regret not keeping the hedge in place with 20/20 hindsight, the current decline in the sector is reaching historic extremes. Sell or Hold? That is the Question As for whether or not to sell at this point. I'm going to hold. I've survived sell-offs like this in the summers of 2006 and 2008 plus the sell-off in late 2018. I would be shocked if the sector is entering an extended decline like the one that occurred from last 2011 to the end of 2015. One reason, aside from the glaring strength of the fundamentals that support much higher prices in the precious metals sector, is that there has not yet been a frenzied, parabolic, high-volume price-chasing move higher. The best example of that is the run-up in the entire sector that occurred in late 2010 and into the spring of 2011. Indicators of Metals Sector Bottoming I'm starting to see several indicators that have been present in the past when the precious metals sector is bottoming. Both gold and the mining stocks (Amex Gold Bugs Index) are as extremely cheap/oversold relative to the S&P 500 as at any time going back to 2001 when the precious metals bull was beginning. Second, the hedge funds per the weekly Comex Commitment of Traders report are now net short both paper silver and gold (the gross short position exceeds the gross long position). It's rare when the hedge funds go net short Comex gold futures. The banks are net long silver contracts and they are aggressively covering their gross gold short position. Historically, this positioning in Comex gold and silver futures between the banks and the hedge funds has often preceded big moves higher in the entire precious metals sector. Finally, Newmont Mining (NEM) after its post-earnings blood-bath in the stock market on July 25th is at its most oversold technically going back to 1987 (the Dow plunged 25% in October 1987). This is another indicator that the sector may be bottoming. Precious Metals & Stock Market Divergence This is not to say that gold, silver and mining stocks will not go lower from here. Anything can happen if the stock market falls off of a cliff, the risk of which is quite high currently. However, I believe that most of the potential sellers are now sold out of their long positions in the mining stocks. Furthermore, in addition to being short gold and silver futures contracts, the hedge funds are also likely shorting mining stocks via GDX. In any indication of rally in the sector, the hedge funds will quickly cover their short positions and go long. It's my strong conviction that ultimately, whether or not the stock market has a considerable amount of additional downside - and I believe it does - at some point the precious metals sector will diverge positively from the rest of the stock market and head eventually to new all-time highs. See November 2008 to March 2011 for an example of this occurrence. Dave Kranzler is a hedge fund manager, precious metals analyst, and author. After years of trading expertise build-up on Wall Street, Dave now co-manages a Denver-based, precious metals and mining stock investment fund. This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis. The views expressed in this article are those held by Dave Kranzler and not Kinesis.

Dave Kranzler
Dave Kranzler

04/08/2022

Gold Holds Near $1,760 as Haven Demand From US-China Tensions Offset by Hawkish Fed

Gold is trading around $1,760 an ounce as it finds itself being pulled by two contrasting factors. The visit of US House Speaker Nancy Pelosi to Taiwan has increased political tensions between China and the US with China increasing military operations in the area in response and increasing demand for safe-haven assets such as gold as a result. However, gold’s potential gains from this deteriorating political outlook is offset by the latest comments from Federal Reserve officials that point to further large interest rate hikes with Charles Evans forecasting an increase of 50 to 75 basis points in September. In this environment of ever-rising interest rates, gold’s appeal diminishes due to its lack of yield. While Fed officials have been speaking about future rate hikes, tomorrow is set to bring another actual interest rate increase with the Bank of England expected to raise its benchmark rate by 50 basis points. Historically, even during the depth of Donald Trump’s US Presidency when US-China relations were historically low amid a trade war, the situation has ultimately resolved itself in a harmony of sorts. So while Pelosi’s Taiwan trip is causing a short-term increase in tensions, when this stern rhetoric and military show of strength fades, market focus will return to interest rates and the negative long-term impact that is likely to have on gold. Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience inwriting about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewableenergy and the challenges of avoiding greenwash while investing sustainably. This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

Rupert Rowling
Rupert Rowling

03/08/2022

Gold & Silver August Outlook - Monthly Review - 2022

Gold Outlook for August Gold enters August on an optimistic note with the rhetoric surrounding the Federal Reserve’s latest interest rate decision pointing toward a less aggressive rate hike trajectory in the following months by the US central bank. The Race to Curb Inflation Gold investors will be hoping that the gold price continues the path it was plotting out at the end of July, that after a challenging month in which the precious metal dropped more than $100 an ounce, it is recovering some of those losses with it trading around $1,760 an ounce. Markets are now entering a tipping point where the actions of central banks across the world to tame inflation, namely increasing interest rates, are showing tentative signs of cooling down the pace of consumer price increases yet this is now needing to be balanced against the looming threat of recession, with both the US and the UK potentially already in that negative situation. Will Gold Continue its Recovery? Gold finds itself right in the middle of this economic balancing act. The threat of rising interest rates and indeed the implementation of these hikes have been the principal drag on the price of gold in the last few months. On the face of it, the market reaction to the Fed’s latest large hike, a second consecutive increase of 75 basis points, looks to be overdone.  Although the hike was in line with market expectations, the move still represents one of the largest in US history and higher interest rates are a clear negative for gold due to its lack of yield making other, interest-paying asset classes, such as bonds, more attractive. The fact gold has been able to stage such a recovery at the tail end of July is entirely due to revised market expectations on how great future Fed interest rate hikes will be and for how long the US central bank will maintain its current hawkish stance. Eyes on the Upcoming FOMC Minutes How much leeway the Fed has in its upcoming rate decisions will largely be determined by the health of the US economy. The release of the latest US job opening data on Tuesday will therefore be keenly anticipated while investors and central bankers alike will be hoping that the US inflation figures due out on August 10th show that inflation has peaked. While solid data is a key factor in determining price moves, words and rhetoric have often proven as significant a catalyst. As such, the release of the minutes of the Federal Open Market Committee on August 17th will be pored over by analysts and traders, desperate to gain an insight into how high and for how long the Fed intends to raise rates for. Gold Caught in a Balancing Act Gold finds itself hostage to the Fed actions with the two main drivers for the precious metal’s underperformance in July, an aggressive Fed and a strong dollar, set to remain the key determinants of gold’s price action in August. The recent rally underlines the strength of the underlying support that remains among gold investors and should provide a strong floor on its price but how much more ground gold can claw back on the upside will be capped by what August’s interest rate decision has in store and the consensus in the market leading up to it. Silver Outlook for August Silver investors finally have some good news to cheer with the price climbing back above $20 an ounce to recover back to the level it was at the end of June. The key question: is this the start of a silver surge? A Positive Outlook Ahead? Certainly, the fundamental outlook remains very supportive for silver with the metal a key component in the energy transition, used both in photovoltaics for solar energy and in batteries for electric vehicles such as Tesla and BYD. Indeed, silver is set for a record year of demand, according to the Silver Institute. However, both those statements have been true throughout the year and this didn’t stop silver’s price plunging from above $26 an ounce to below $19 an ounce in a matter of weeks. So why would things be any different now? A lot of the factors that were in place back in April when silver was trading at much-elevated levels from its current price remain true today. The war in Ukraine is sadly showing no sign of ending so silver’s haven appeal is still attractive. Inflation is still raging with silver considered a potential hedge against fast-rising consumer prices. And the fundamental outlook remains positive, as already stated. Has Silver Reached a Potential Bottom? The big change, and the cause of silver’s price plunge from April onwards, has been the implementation of a series of interest rate hikes by the Federal Reserve allied to the knock-on impact that has had in sending the dollar, which silver is priced in, to record levels. With the Fed still in the middle of its hike cycle, with another increase expected in August, silver’s potential path upward has plenty of obstacles in front of it. Yet with silver having shown where the potential bottom in its price is, now could be a timely opportunity for the brave investor to buy into silver’s recovery story. Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience inwriting about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewableenergy and the challenges of avoiding greenwash while investing sustainably. This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

Rupert Rowling
Rupert Rowling

01/08/2022

Gold Starts August By Holding Around $1,760 as Markets Digest Fed’s Future Intentions

Gold is starting a new week holding around $1,760 an ounce as the markets assess the true state of the economy as well as the likely future action of central banks across the world. Later this week brings the latest interest rate decision by the Bank of England and while this is likely to have less material impact on the gold price than that of the Federal Reserve, it will still be an important indicator of how aggressive central banks feel they need to be to bring inflation back to its 2% target. Recent comments from Fed officials hint at the market’s initial reaction to the Fed’s rate hike last week that focused on rhetoric that supposedly pointed to a less aggressive strategy by the US central bank going forward, may be misguided. A large portion of markets' recent bounce, which gold has also been a beneficiary of, has been predicated on future Fed rate hikes being smaller with fewer of them required. If this proves a false dawn then a fresh slide of both equities, particularly growth stocks, and gold can be expected. For now at least, gold is holding on to the recovery it made at the end of last week awaiting the next set of data, such as this week’s US jobs figures, to provide insight on the health of the US and indeed global economy. Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience inwriting about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewableenergy and the challenges of avoiding greenwash while investing sustainably. This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

Rupert Rowling
Rupert Rowling

01/08/2022