'Clash' coming: expectations vs. reality

he gold market will remain stuck in a choppy trading pattern until the FOMC March meeting, with markets starting to price in a 50-basis-point rate hike. Here's a look at Kitco's top three stories of the week:

3. Shockingly strong U.S. employment report

2. A major policy pivot from the ECB

1. Markets are underpricing how 'aggressive' the Fed will have to be — Ray Dalio's hedge fund Bridgewater Associates

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David – http://markethive.com/david-ogden

Gold's strong decline results in a high probability of a death cross forming

Gold has declined dramatically this week opening at approximately $1841 on Monday, with the February 2022 Comex contract currently fixed at $1790.10. Gold declined by three dollars today taking the weekly price decline two $50.90. If you factor in the highest value gold traded which occurred on Tuesday at $1854 to today's low it equals a $78 differential between the highest and lowest price gold traded to this week.

Most alarming on a technical basis it seems as though a pattern called a "death cross" is imminent. Currently, the 50-day moving average is fixed at $1805.70 and the 200-day moving average is fixed at $1805.50. In other words, the current spread between the short-term and long-term averages is $0.20.

According to Investopedia, "The death cross is a technical chart pattern indicating the potential for a major sell-off. The death cross appears on a chart when a stock's short-term moving average crosses below its long-term moving average. Typically, the most common moving averages used in this pattern are the 50-day and 200-day moving averages."

However, one needs to understand that this technical chart pattern is using extremely long moving averages which intrinsically converts to major lag when compared to real-time data. There are many examples where a "death cross" is not reliable in indicating a further price decline because it is created from lagging data that was formed. After all, a major selloff has already occurred. That being said, it can be a solid indicator revealing that the selling pressure could take gold to new lows.

Nonetheless, it is something to be acutely aware of considering the fundamental events that occurred this week. First, on Wednesday the Federal Reserve's FOMC meeting concluded and confirmed what many market participants had anticipated which is that a series of interest rate hikes are forthcoming beginning in March. Yesterday's release of the fourth-quarter GDP came in exceedingly strong indicating that the annual rate of GDP increased by 6.9%. This gives the Federal Reserve the data necessary to initiate liftoff and begin a series of rate hikes throughout this year and next.

Today the Commerce Department via the St. Louis Federal Reserve released the most recent data on inflation showing that the PCE index (the preferred inflationary index used by the Federal Reserve) joined its component the CPI coming in at the fastest rate in the last 40 years. The current PCE index jumped 5.8% in 2021 after factoring in a sharp increase in December. This puts even more pressure on the Federal Reserve to raise rates quickly, with some analysts projecting that the first-rate hike could be as high as ½% to1 ½% to compensate for the current inflationary pressures.

By Gary Wagner

Contributing to kitco.com

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

David – http://markethive.com/david-ogden

Gold is insurance against a hawkish Fed policy mistake

I hope all the gold investors out there are wearing their seatbelts because if this past week is any indication, the price action is going to continue to be a bumpy ride.

Gold bulls were once again caught on the back foot as the Federal Reserve struck a hawkish tone on Wednesday, setting the stage for a rate hike in March and a reduction of its bloated balance sheet before the end of the year.

Following the central bank's monetary policy decision, Fed head Jerome Powell added to the hawkish posturing, saying that the economy and the labor market are in good positions to stand up to potential rate hikes.

"I think there's quite a bit of room to raise interest rates without threatening the labor market," Powell said during this press conference.

The Fed has laid the groundwork and not it looks like the markets have already started to build a flimsy house of cards on it. Markets are now pricing the potential for five rate hikes this year and the potential for a 50-basis point move in March.

The only problem is some economists and analysts are now starting to wonder if the U.S. central bank and markets are being too aggressive, especially as economic conditions continue to weaken. The concern is that aggressively tightening could choke off economic growth this year.

"Fed Chair Jerome Powell fuelled fears of a Ratemaggedon with a hawkish performance in his press conference. But even with both wage and underlying price inflation running at near 40-year highs, we suspect that disappointing real economic growth this year will limit the Fed to 100bp of tightening," said Paul Ashworth, chief U.S. economist at Capital Economics.

Gold price down but not out as Fed looks to raise interest rates soon

Although equities have managed to climb out of a deep hole this week, it is clear that volatility is on the rise, making over-valued markets extremely vulnerable.

This is where gold comes in. While the precious metal has taken a big hit, falling roughly 3% since Wednesday's monetary policy meeting, many commodity analysts are not ready to give up on the precious metal.

Many analysts note that gold is not just a hedge against inflation, which the latest PCE data shows is running at a 40-year high. It is also more than a risk hedge against a wobbly equity market. It is now insurance against a policy mistake from the Fed.

We can see just how robust the gold market is. It is more than just the total sum of the ETF market. Thursday, the World Gold Council reported that despite dismal investor demand for gold-backed exchange-traded products, gold demand grew 10% last year.

While the gold market is down, it is certainly not out. Have a great weekend.

 

By Neils Christensen

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David – http://markethive.com/david-ogden

Expert forecasts- what to expect from gold, silver, cryptos, and equities

2022 has kicked off with a hawkish Fed, inflation fears and the end of zero interest rates in sight. Will markets collapse under the weight of a more aggressive central bank or will financial assets and cryptocurrencies hit new highs?

Join us LIVE on YouTube at 3:00 pm ET, Jan. 25, 2022 for a special, interactive session as we discuss how best to position your portfolio with Lynn Alden, founder of Lyn Alden Strategy, and Gareth Soloway, chief market strategist of InTheMoneyStocks.com.

Combining Alden's breadth of macroeconomics knowledge with Soloway's powerful technical analysis tools, this panel will give traders and investors a complete top-down picture of where asset prices are headed and how to best execute on trade ideas.

Is 2022 the year we see capital rotation out of risk assets like cryptos and stocks into safe-haven assets like gold? Will the laggards of 2021 become the leaders of 2022 and vice versa? How much upside is left in the global equity markets? Will the global economy be plagued by stagflation, inflation, or deflation? Moderated by Kitco News' David Lin, this power panel will address these questions, and more, as well as take questions directly from the audience.

This event marks the first time Alden and Soloway join forces to dissect market action.

Don't miss this chance to participate LIVE. Subscribe to Kitco NEWS on YouTube.
 

By Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

David – http://markethive.com/david-ogden

Market participants pay attention to the upcoming Fed meeting and Ukraine

Gold had moderate gains today as market participants await the policy decisions that will be revealed on Wednesday when the Federal Reserve concludes its FOMC meeting, releases its most current policy statement and holds a press conference with Chairman Powell. Also, on the minds of the investment community are the geopolitical uncertainties as tensions grow regarding a buildup of Russian troops on their border with Ukraine.

As of 4:05 PM EST gold futures basis, the most active April 2022 Comex contract is fixed at $1842.70, after factoring in today’s net gain of $11 or 0.60%. The Federal Reserve has already begun the process of tapering their asset purchases which were at $120 billion per month. At their current pace, they will complete this process by March of this year, at which time the Fed will no longer be purchasing any new assets. However, once complete, the asset balance sheet will have ballooned to approximately $8.9 trillion. It is anticipated that the Federal Reserve will reduce its asset balance sheet at some point towards the end of this year.

The overwhelming consensus is that the Federal Reserve will tighten its monetary policy with a series of rate hikes over the next two years. Currently factored into market sentiment is the high probability of three to four ¼% rate hikes in 2022, which will be followed by an additional three rate hikes of ¼% in 2023.

Reuters polled 86 economists earlier this month, and the results indicate that a strong minority (40 out of 86) believe that the Fed will implement at least four ¼% rate hikes this year. The poll also revealed that 37 out of 51 economists believe that the central bank will start reducing its enormous balance sheet by the end of the third quarter.

Russia – Ukraine geopolitical tensions grow

it is widely believed that market participants for the most part have already largely factored in the updated more hawkish monetary policy that will be announced by the Federal Reserve on Wednesday. That being said, today’s gains in gold were largely due to the rising tensions between Russia and Ukraine.

Russia continues to build up its military presence on its border with Ukraine. This has created genuine concern throughout Western Europe and the United States. Western Europe has put NATO allies on standby, and the United States announced today that it is putting 8500 troops on alert as well. This increased geopolitical tension has created bullish undercurrents for gold pricing.

Our technical studies indicate that current resistance for the most active April contract of gold first occurs at $1848, the intraday high that occurred on Thursday, January 20, to $1851, the 23.6% Fibonacci retracement created from a data set that begins on November 3, 2021, when gold was trading at $1750 up to the high of November 16 at $1879.60. Our studies also indicate that support for gold occurs at $1826, which is the 61.8% Fibonacci retracement of a much longer data set which begins on June 1, 2021, when gold reached $1920, down to the lows that occurred during the first week of August when gold traded to $1678.

 

By Gary Wagner

Contributing to kitco.com

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

David – http://markethive.com/david-ogden

Is Fed about to make a mistake? Here's what gold is saying

Gold and silver hit two-month highs this week, while the crypto market suffered major losses, with bitcoin plunging below $35,000.

To explain all of this, analysts pointed to rising U.S. treasury yields triggered by an aggressive Federal Reserve. Markets are now pricing in four rate hikes and a balance sheet runoff this year. Here's a look at Kitco's top three stories of the week:

3. Gold price rallies $30, silver price surges more than 3% as investors flock to safe-havens

 

2. Are gold prices about to fly? Gold is a hedge against a policy mistake, says Pepperstone

 

1. Bitcoin and Ethereum plummet as analysts link selloff to stocks volatility, hawkish Fed

 

By Anna Golubova

For Kitco News
 

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David – http://markethive.com/david-ogden

Gold price next week: a breakout or a sideways trap? All eyes on hawkish Fed and stocks volatility – analysts

The gold market surprised with a breakout above $1,830 an ounce this week. And analysts say next week will be pivotal in whether gold breaks out or gets stuck in the sideways price action again.

In an unexpected move, the precious metal surged to two-month highs this week, with investors flocking to safe havens as volatility rocked the equity markets ahead of the Federal Reserve meeting next week.

With stocks and the crypto space selling off, money has to go somewhere, RJO Futures senior market strategist Frank Cholly told Kitco News.

"Gold rallied this week due to all the weakness in the equity market. Bitcoin is down pretty good too," Cholly said. "We have a bottom in gold. The question is, are we going to go lower and stay sideways or climb towards $1,900. The precious metal needs another close above $1,830. It's critical to hold that level before a move above $1,850."

The move in gold did surprise some analysts because of how swift it was, said Gainesville Coins precious metals expert Everett Millman.

"The gold market has been going sideways for several months. To see a breakout in either direction was a bit surprising. Coming into this week, sentiment in the gold market was very negative. Many big banks were projecting the gold price to go down. This ended up playing in gold's favor as negative sentiment set us up for a reversion in another direction," Millman said.

Also, rising oil prices and strong retail demand have contributed to higher price levels in gold. "Higher oil does make it more expensive to get gold out of the ground. We could see constraints in the gold supply being mined. Plus, the real demand for gold is still strong. The U.S. Mint saw 12-year highs in gold sales, while the Perth Mint saw 10-year highs. Average retail investors are still buying gold at the fastest pace in ten years," Millman added.

All eyes are on how markets will react to the Federal Reserve monetary policy meeting, scheduled for Wednesday. Cholly estimates to see a steeper sell-off in U.S. equities as the central bank maintains the same level of hawkishness.

"We could go through a more meaningful correction in equities. We'll have more evidence of the Fed's direction. And the stock market likes to throw tantrums to get the Fed's attention. Next week, gold's strength will hinge on equities moving lower and reallocation of money into precious metals. Silver may even become the leader as we move forward," Cholly pointed out.

If gold does break above $1,850, it opens the door for $1,870-80 and eventually $1,900, he added.

Fed in focus

The Fed meeting, which will be followed by the central bank Chair Jerome Powell's press conference, is the biggest macro event next week.

Analysts expect to get more hawkish clues in terms of the first rate hike in March and more clarity around the potential balance sheet runoff. Currently, markets are pricing in four rate hikes in 2022.

"With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a further acceleration in wage growth," said Capital Economics chief North America economist Paul Ashworth. "A dissenting vote, to raise rates immediately, from one of the hawkish regional Fed Presidents – who will be voting as part of the annual rotation – could also add fuel to the recent bond market sell-off."

The 'Black Swan' event that could wipe out your wealth and how to hedge against it

There is also a risk that the Fed could get even more hawkish by announcing the completion of the tapering process immediately, said ING chief international economist James Knightley.

"The Federal Reserve meeting will be the main focus, and we strongly suspect that we could see the announcement of the ending of QE asset purchases brought forward from the mid-March end-point currently signaled, to an immediate cessation, "Knightley wrote. "In an environment where the economy has fully recovered the lost output from the pandemic, where unemployment is back below 4% and where inflation is at near 40-year highs, it seems strange to say the least for them to continue stimulating the economy."

 

Other key data releases to keep an eye on will be Tuesday's CB consumer confidence, Thursday's Q4 GDP number, jobless claims and durable goods orders, as well as Friday's PCE price index.

"We expect to learn that fourth-quarter GDP growth was a slightly disappointing 4.0% annualized. But markets may focus more on the Employment Cost Index (ECI). Private wage growth hit 4.6% y/y in the third quarter and could have climbed as high 5% in the fourth, which would make a March rate hike a near-certainty," Ashworth noted.

By Anna Golubova

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David – http://markethive.com/david-ogden

Gold market finally realizes Fed is completely wrong; $2,000 now on the way

David Lin, Anchor at Kitco News discussed gold and inflation with Wyckoff.

Wyckoff explained that the reason there was a decoupling between gold and the Consumer Price Index last year was because it was perceived by the marketplace as an occurrence that was not going to be permanent. “The Fed called it transitory, and that’s just not the case. It’s proving not to be transitory. It is proving to stick around for a while longer,” Wyckoff said. “Future inflation reports are going to be watched by gold traders. And if they continue to be hot, that’s going to support upside gold price moves.”

Speaking more about inflation, Wyckoff said, “When central banks were infusing money into the financial system at the rate that they were for the past couple of years during the pandemic, that caused inflation down the road. That cash was going to start chasing assets and that’s what’s happening. We are seeing price inflation, and we have supply chain issues,” he continued. “That’s prompted some shortages. That created an end user that wants to stockpile even more supplies which only adds to price inflation.”

Gold has had a sizeable run up in the last two months. Wyckoff predicts the trajectory for gold is going to continue to be sideways to higher this year. “This could be a secular bull run. In my Kitco Annual Report on Gold, I forecast that gold was going to experience a good year in 2022, and that has started out to be the case,” he noted. “I believe that trend will continue. The next upside objective for the gold market is $1,850 an ounce. We already hit the November high of around $1,890. If those levels are taken out, that’s going to give the bulls more momentum to push prices even higher.”

Wyckoff also discussed what direction he sees Bitcoin headed. “The trend is that Bitcoin has been trading lower. The path of least resistance for prices is going to remain sideways to lower until there’s some technical development to suggest otherwise,” Wyckoff said.

 

For more on gold prices and inflation, please watch the full video above.

 

By David Lin

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David – http://markethive.com/david-ogden

Gold price rallies $30, silver price surges more than 3% as investors flock to safe-havens

Both gold and silver are seeing unexpected rallies, with prices hitting two-month highs. Investors are flocking to safe-haven metals as inflation and geopolitical tensions are triggering increased volatility ahead of the Federal Reserve meeting next week, analysts tell Kitco News.

February gold futures were up more than $30 on Wednesday, last trading at $1,842.90 an ounce. In the meantime, March silver futures surged more than 3%, last trading at $24.21.

Prices began to move, markets were digested more signs of problematic inflation on a global scale. In Britain, annual inflation rose more than expected, advancing 5.4% in December — the highest reading since March 1992. Canada's inflation rate also rose to the highest in 30 years, with the consumer price index climbing to 4.8% on an annual basis in December.

Higher inflation numbers are adding to the risk-off sentiment in the marketplace, which is already pricing is more rate hikes and a higher possibility of central banks making a policy mistake while tightening.

"Given the calls for even more rate hikes this year than markets are pricing in, not to mention larger individual increases than we've seen for many years, perhaps we are seeing some inflation hedging from traders that don't think central banks are doing enough to bring price pressures down," said OANDA senior market analyst Craig Erlam.

Geopolitical tensions are also starting to favor precious metals as investors become more cautious. The move higher in gold and silver coincided with the Biden administration announcing an additional $200 million in defensive military aid to Ukraine, citing fears of a Russian invasion.

"I was looking for headlines and data releases that coincided with the gold surge this morning. I can't help but think that there is increased concern around what's happening with Russia and Ukraine. This morning, we got the news that the United States released $200 million in military aid to Ukraine. And this follows on with reports over the weekend that the U.K. was providing military assistance to Ukraine. It's just like a perfect mix here for gold prices in the very short term," DailyFX senior strategist Christopher Vecchio told Kitco News.

Volatility options expiration on Wednesday was also driving gold higher. "Traders have been forced to roll their exposure into higher-priced volatility contracts. And as a result, we're seeing a spike in treasury volatility and in the VIX. Because of the spike in volatility, gold prices are getting a nice little tailwind here," Vecchio said.

Gold tends to benefit from higher volatility because it means greater uncertainty and higher demand for safe-havens. "This is kind of like a perfect mix of things to produce a very short-term rally for gold prices. Treasury yields have taken a step back, the U.S. dollar is down slightly, but with measures of volatility exploding higher, it looks like gold has a nice reason here for a short-term bounce," Vecchio added.

On top of the uncertainty angle, January is a historically good month for gold. "When you look at measures of seasonality, January has been the best month of the year for gold over the past five-to-ten year window," Vecchio stated.

proving physical demand in Asia is another positive driver for the yellow metal from the seasonality perspective.

"Chinese demand for gold is single-handedly keeping gold prices from collapsing under the weight of a hawkish Fed. As we approach Chinese New Year, physical demand in the Middle Kingdom remains extremely strong with SGE data for December showing 193mt of outflows from vaults," said TD Securities commodities strategists. "Chinese traders [also] substantially added to their gold length, while simultaneously covering their notable silver short and adding a marginal long position in the white metal. This comes amid signs of policy loosening in China, as domestic growth weakens and as infections spread, but also ahead of Chinese New Year festivities."

The 'Black Swan' event that could wipe out your wealth and how to hedge against it

However, whether this move has the ability to sustain its gains is another question, especially in light of rising Treasury yields and a hawkish Federal Reserve, Vecchio pointed out.

"I don't necessarily have a lot of faith in this move higher," he said. "We've seen U.S. treasury yields, both nominally and in real terms, move significantly higher here at the start of 2022. Historically speaking, when real yields go up, gold prices tend to go down. And we have an environment defined by tightening monetary policy and a reduction in inflation measures over the course of this year. It suggests that real yields will continue to move higher. And so I don't have a lot of faith in gold's move up here today."

There is a better outlook for silver from the economic angle because the precious metal is used in renewable energy processes. "Demand for silver has a real economic use relative to gold," Vecchio said. But there is strong resistance at $24.90, and traders are likely to take profits at those levels in the short term, he added.

Despite silver's catch-up potential relative to gold, Commerzbank analysts are also projecting gold and silver price gains to be short-lived due to the hawkish Federal Reserve backdrop.
 

By Anna Golubova

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

David – http://markethive.com/david-ogden

Gold slightly down Tuesday but silver sharply up, hits 7-week high

Gold futures prices are a bit lower in midday U.S. trading Tuesday. The yellow metal sees some price pressure from rising government bond yields and a stronger U.S. dollar index on this day. Meantime, silver hit a seven-week high and the bulls have started a near-term price uptrend in the metal. Some keener risk appetite in the marketplace early this week is supportive for the safe-haven metals. February gold futures were last down $2.50 at $1,813.90 and March Comex silver was last up $0.557 at $23.47 an ounce.

Global stock markets were mostly weaker overnight. U.S. stock indexes are solidly lower at midday, on risk aversion after a three-day holiday weekend. Crude oil prices pushed to a seven-year high today after the United Arab Emirates was hit by a deadly drone attack on its capital. While the damage was limited, the strikes by Yemen's Iranian-backed Houthi rebels reminds how vulnerable oil producers are to attack from drones. Nymex crude oil futures prices and trading around $85.25 a barrel. North Korea is also making geopolitical noise by test-firing missiles.

The 'Black Swan' event that could wipe out your wealth and how to hedge against it

Bond yields are also on the rise this week. The U.S. Treasury 10-year note is presently yielding 1.856%–the highest level in two years. Traders and investors are sensing that inflationary pressures will get worse before they get better. Rising inflation should be ultimately bullish for the metals markets. Meantime, the U.S. dollar index is making a good rebound Tuesday, after hitting a two-month low last Friday.

In other news, China cut its main interest rates to prop up the world's second-largest economy. This comes as other major central banks of the world are tightening their monetary policies. China President Xi Jinping at the Davos virtual economic summit warned major industrial nations not to raise interest rates too quickly, which could choke the global economic recovery.

Technically, February gold futures bulls have the overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the January low of $1,781.30. First resistance is seen at today's high of $1,822.90 and then at last week's high of $1,829.30. First support is seen at today's low of $1,804.70 and then at $1,800.00. Wyckoff's Market Rating: 6.0

March silver futures prices hit a seven-week high today and scored a bullish "outside day" up. The silver bulls and bears are back on a level overall near-term technical playing field. However, a four-week-old uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the January low of $21.945. First resistance is seen at today's high of $23.68 and then at $24.00. Next support is seen at $23.00 and then at today's low of $22.82. Wyckoff's Market Rating: 5.0.

March N.Y. copper closed down 295 points at 439.10 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage but are fading. Prices are still in a four-week-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the January high of 460.10 cents. The next downside price objective for the bears is closing prices below solid technical support at 425.00 cents. First resistance is seen at today's high of 444.90 cents and then at 448.00 cents. First support is seen at today's low of 438.10 cents and then at 435.00 cents. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David – http://markethive.com/david-ogden