Dramatic’ re-pricing across all financial assets coming as the Fed moves away from its 2 inflation target to this – Larry McDonald

Dramatic' re-pricing across all financial assets coming as the Fed moves away from its 2% inflation target to this – Larry McDonald

Financial markets are about to witness one of the most epic migrations of capital in history as investors rush into hard assets, warned Larry McDonald, Founder of The Bear Traps Report and New York Times bestselling author of 'How to Listen when Markets Speak' and 'Colossal Failure of Common Sense.'

With the national debt approaching $35 trillion, there are only two ways out of the situation — defaults or printing more money, McDonald told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.

"The only way to get out of that kind of debt hole is if you keep inflation above interest rates. That's how you monetize the debt," McDonald said. "That is why [the Federal Reserve] needs a much higher inflation target. It'll [be] a slow, manageable default. But it's the only way out of this colossal debt hole."

In order to tame inflation back to 2%, the Fed needs to keep raising rates, but it can't do that without triggering a 2008-like financial crisis, McDonald pointed out.

"[Powell] should raise rates another 150 basis points. But if you push rates up from here, you will very quickly bring on a financial crisis much worse than Lehman," he said.

Fed will have to raise its 2% inflation target

The Fed will have to cut rates to avoid a banking collapse and a brutal recession. However, first, it must raise the no-longer-attainable 2% inflation target. "[The Fed] will start circulating the white papers and working with other central bankers worldwide to pitch this in a group setting," McDonald noted.

The inflation shift talk can start as soon as the Jackson Hole Economic Policy Symposium, which takes place yearly at the end of the summer, he added. "If you have a 35 trillion debt hole, you need interest rates below the inflation rate, where you are wiping out debt with inflation."

McDonald also weighed in on the state of the U.S. banking sector, warning of a massive M&A cycle coming. Watch the video above for details.

Move into hard assets

According to McDonald, the U.S. is in a world of persistent inflation, where all asset classes will see a "dramatic" re-pricing as capital flees from financial assets into hard assets.

"The moment [the Fed] tips its hand, this creates a really bullish scenario for hard assets," McDonald stated.

A commodity bull market will dominate the financial landscape, with several metals looking at significant upside. For McDonald's top commodity plays, watch the video above.

McDonald sees gold reaching $3,000-$3,500 an ounce in the next 12-18 months. But he is even more bullish on another precious metal, pointing to one ratio "screaming" to sell gold and buy this metal instead. For insights, watch the video above.

McDonald also shared his price outlooks for silver, platinum, oil, and natural gas. Watch the video above for price targets.

Kitco Media

Anna Golubova

Time to Buy Gold and Silver

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

Gold Price News: Gold Rises After US Jobless Figures

Gold Price News: Gold Rises After US Jobless Figures

Prices rose as high as $2,338 an ounce on Thursday, compared with around $2,310 an ounce in late deals on Wednesday.

US initial jobless claims figures released Thursday came in at 231,000 in the week to May 4th, well above market expectations of 210,000. A higher-than-expected rise in the number of people seeking unemployment benefits strengthens the call on the US Fed to slash interest rates to stimulate the economy.

Recent bets among interest rate traders have begun to coalesce around September as the most likely start for US interest rate cuts, with a majority expecting no change to monetary policy at upcoming meetings in June and July.

Lower interest rates tend to support gold prices because they weaken the US dollar, making gold cheaper for buyers in other currencies, as well as reducing the opportunity cost of holding non-yield-bearing assets.

Elsewhere, the World Gold Council issued a report Wednesday that highlighted a number of factors behind the new all-time high prices seen in April:

Gold Market Commentary: Higher-for-longer: Inflation not growth | World Gold Council

The industry group cited a positive flip in North American gold ETF flows which combined with strong Asian ETFs. Moreover, increased geopolitical risk, positioning in the Shanghai futures exchange and strong central bank buying all contributed to the higher prices in March and April, it said.

Looking ahead, the markets will be watching out for several speeches by US Fed officials on Friday for clues on the central bank’s view on the outlook for interest rates, especially in light of the recent surprise rise in jobless claims numbers.

Time to Buy Gold and Silver

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

Gold investors watching inflation data next week to see if this new momentum will last

Gold investors watching inflation data next week to see if this new momentum will last

Kitco NEWS has a diverse team of journalists reporting on the economy, stock markets, commodities, cryptocurrencies, mining and metals with accuracy and objectivity. Our goal is to help people make informed market decisions through in-depth reporting, daily market roundups, interviews with prominent industry figures, comprehensive coverage (often exclusive) of important industry events and analyses of market-affecting developments.

Gold investors watching inflation data next week to see if this new momentum will last teaser image

After two weeks of consolidation, gold is attracting some new bullish attention after holding initial support at around $2,300 an ounce, according to some analysts.

Bouncing off its lows at the start of the week, gold is looking to end Friday near a two-week high. June gold futures last traded at $2,375.40 an ounce, up nearly 3% from last Friday’s close.

At the same time, silver has managed to push back above $28 an ounce after holding critical support levels. May silver futures last traded at $28,310 an ounce, up a solid 6% from last Friday.

Some analysts note that gold is benefiting from fluid interest rate expectations following disappointing economic data. Thursday, a jump in weekly jobless claims pointed to growing slack in the U.S. labor market and brought renewed focus to last week’s disappointing nonfarm payrolls report.

Friday, the Univerisity of Michigan’s preliminary consumer sentiment survey showed optimism falling to a five-month low, while inflation expectations rose to a nearly two-year high.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that it is not surprising that gold is seeing a renewed push to the upside as the market’s bullish conviction has not been tested during the two-week consolidation period.

“Now we see a technical break to the upside, supported by signs the U.S. labor market is cooling. With inflation being controlled, the expected number of U.S. rate cuts has been lifted to two from one,” he said.

However, some analysts warn that although markets are now pricing in two rate cuts this year, these expectations are extremely fluid.

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said he expects rallies in gold and silver to be sold in the near term.

“Traders do not have a clear signal from the Fed in relation to their monetary policy,” he said. “The job data and other economic numbers indicate that the economy is slowing down, but the Fed is still determined to keep rates higher for longer. All of this is bringing strength back to the dollar index and taking the shine away from the metal.”

Looking at the precious metals’ technical outlook, Alex Kuptsikevich, Senior Market Analyst at FxPro, said that the renewed momentum in gold and silver comes after both metals managed to hold key retracement levels.

“This week's upward momentum revives the idea that the decline in the second half of April was a corrective pullback,” he said.

However, Kuptsikevich added that although gold and silver are seeing robust moves higher, a lot of work still needs to be done to attract new capital and drive prices above the recent all-time highs above $2,448 an ounce.

“A further rise in the price of gold with high bond yields in developed countries, huge budget deficits in many countries, and the need to support the economy makes one think that the upside potential is limited,” he said. “Until gold and silver reach a new level, we doubt the success of a new attack on the highs and see the potential for a renewed decline.”

Although gold could continue to consolidate, Peter Granditch, renowned Financial Analyst and market strategist, said that risks for gold and silver remain to the upside as interest rates have peaked due to weakening economic activity. However, he added that investors should be patient.

“I’m hard-pressed to think gold can get much below its recent lows while the upside remains hundreds of dollars (if not more) higher,” he said in a comment to Kitco News. “I don’t think this leg up will be as hard and as fast as the one we saw earlier his year, but my long-standing target of $2,536 is most reachable this year.”

With renewed attention on economic fundamentals, some analysts note that next week will be critical to gold and silver’s potential recovery and drive to record highs.

Next week's main economic event will be the April Consumer Price Index after the Federal Reserve signaled that its fight against inflation has been insufficient as prices remain well above its 2% target.

“If [consumer] prices rise more strongly once more, the recent slight rise in interest rate hopes is likely to be dampened again. Gold should then fall back again,” said Barbara Lambrecht, precious metals analyst at Commerzbank, in a note Friday.

Along with U.S. CPI data, some economists have said that after the disappointing consumer sentiment data on Friday, U.S. retail sales data will also garner some market attention. Traditionally, consumers who are less optimistic about the health of the economy spend less, which will weigh on economic activity.

“The renewed slump in the University of Michigan consumer sentiment gauge to a six-month low is hard to explain given that gasoline prices are now falling again, the stock market is back close to a record high, and there is little evidence of any major downturn in the labor market,” Paul Ashworth, Chief North America Economist at Capital Economics, said in a note. “That leaves us wondering if we’re missing something more worrying going on with the consumer. We don’t think so, but next week’s April retail sales figures will provide more insight.”

Economic data to watch next week:

Tuesday: U.S. PPI, Federal Reserve Chair Jerome Powell to speak in Amsterdam, Netherlands

Wednesday: U.S. CPI, U.S. retail sales, New York Fed Empire State Survey

Thursday: U.S. weekly jobless claims, U.S. building permits housing starts, Philadelphia Federal Reserve manufacturing survey

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

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

Gold Price News: Gold Dips As Mid-East Fears Ease

Gold Price News: Gold Dips As Mid-East Fears Ease

Gold prices edged slightly lower on Tuesday, coming under moderate downward pressure from an easing in geopolitical tensions in the Middle East.

Prices eased as low as $2,311 an ounce before regaining some of the losses to trade at around $2,317 an ounce by late afternoon. That compared with around $2,327 an ounce in late trades on Monday.

Palestinian militant group Hamas on Monday said it has accepted a proposal from Egypt and Qatar which involved a weeks-long halt to fighting in Gaza and the release of several dozen hostages. However, the latest proposal did not appear to meet Israel’s conditions for halting its military operations in Gaza.

The ongoing conflict between Israel and Hamas has injected a risk premium into gold prices, and any signs of a potential end to hostilities would be taken as a bearish signal for safe haven gold.

Gold prices did rebound slightly later on Tuesday, taking support from comments by US Fed officials overnight that kept alive hopes that the central bank may yet cut interest rates this year. Recent market expectations for the first rate cut have been pushed back to September, compared with an earlier target of June.

US 10-year treasury yields also edged lower on Tuesday, providing a supportive factor for gold prices.

In general though, gold prices have been range bound since the last week of April, showing little convincing momentum in either direction in recent days.

Looking ahead, Wednesday will see a flurry of speeches by US Fed officials, which will be closely watched for any signs of monetary policy changes. Then on Thursday, eyes will be on the US weekly initial jobless claims figures, for a pulse-check on the health of the US economy.

Time to Buy Gold and Silver

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

Gold silver up a bit in quieter two-sided trading

Gold, silver up a bit in quieter, two-sided trading

Gold and silver prices are just a bit higher in midday U.S. trading Wednesday, on some more backing and filling on the charts amid a lack of major, fresh fundamental news in the marketplace at mid-week. Traders are awaiting some fresh markets-moving fundamental news. June gold was last up $1.80 at $2,326.10. July silver was last up $0.156 at $27.70.

Reports said China’s central bank continues to stock up on gold reserves, adding 1.9 metric tons in April, making it 18 straight months for expanding its reserves. However, the reports said the pace of China gold buying has slowed.

The key outside markets today see the U.S. dollar index slightly up. Nymex crude oil prices are firmer after hitting a nearly two-month low overnight and are trading around $78.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is fetching 4.488%.

Technically, June gold futures bulls have the overall near-term technical advantage. A price downtrend is still in place on the daily bar chart, however. Bulls’ next upside price objective is to produce a close above solid resistance at $2,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,250.00. First resistance is seen at this week’s high of $2,341.90 and then at $2,350.00. First support is seen at today’s low of $2,311.40 and then at $2,300.00. Wyckoff's Market Rating: 6.5.

July silver futures bulls have the overall near-term technical advantage. A price downtrend on the daily bar chart has stalled. Silver bulls' next upside price objective is closing prices above solid technical resistance at $29.00. The next downside price objective for the bears is closing prices below solid support at last week’s low of $26.255. First resistance is seen at $28.00 and then at $28.25. Next support is seen at today’s low of $27.24 and then at $27.00. Wyckoff's Market Rating: 6.0.

July N.Y. copper closed down 645 points at 454.10 cents today. Prices closed near mid-range today. The copper bulls have the solid overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 480.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 440.00 cents. First resistance is seen at 460.00 cents and then at this week’s high of 464.50 cents. First support is seen at 450.00 cents and then at last week’s low of 446.60 cents. Wyckoff's Market Rating: 7.5

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

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

Modest downside corrections for gold silver

Modest downside corrections for gold, silver

KGold and silver prices are posting mild losses in subdued midday U.S. trading Tuesday, on corrective pullbacks after Monday’s decent gains. A firmer U.S. dollar index on this day is a mildly bearish “outside-market” force working against the precious metals market bulls. June gold was last down $10.00 at $2,321.30. July silver was last down $0.089 at $27.525.

Risk appetite was not dented much Tuesday, at least not yet, after Israel said it had taken control of part of the southern city of Rafah in the Gaza strip near the Egyptian border. The stepped-up Israeli military operations in Gaza come as there had been better hopes a ceasefire between Israel and Hamas might be imminent.

The key outside markets today see the U.S. dollar index modestly higher. Nymex crude oil prices are near steady and trading around $78.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is fetching 4.429%.

Technically, June gold futures bulls have the overall near-term technical advantage. A price downtrend is still in place on the daily bar chart, however. Bulls’ next upside price objective is to produce a close above solid resistance at $2,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,250.00. First resistance is seen at this week’s high of $2,341.90 and then at $2,350.00. First support is seen at $2,300.00 and then at last week’s low of $2,285.20. Wyckoff's Market Rating: 6.5.

July silver futures bulls have the overall near-term technical advantage. A price downtrend on the daily bar chart has stalled. Silver bulls' next upside price objective is closing prices above solid technical resistance at $29.00. The next downside price objective for the bears is closing prices below solid support at last week’s low of $26.255. First resistance is seen at today’s high of $27.77 and then at $28.00. Next support is seen at $27.25 and then at $27.00. Wyckoff's Market Rating: 6.0.

July N.Y. copper closed down 45 points at 461.05 cents today. Prices closed near mid-range today. The copper bulls have the solid overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 480.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 440.00 cents. First resistance is seen at today’s high of 464.50 cents and then at the April high of 469.45 cents. First support is seen at this week’s low of 453.55 cents and then at 450.00 cents. Wyckoff's Market Rating: 7.5.

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

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

Gold Price News: Gold Eases Lower Finds Support Below 2290

Gold Price News: Gold Eases Lower, Finds Support Below $2,290

Gold News

Market Analysis

Gold prices eased lower on Thursday, giving up the previous day’s gains, although prices came back up off the lows to finish down around 0.7% day-on-day.

Prices fell as low as $2,286 an ounce before climbing back to around $2,304 an ounce later in the day. That compared with around $2,322 an ounce in late deals on Wednesday.

Gold prices underwent successive moves lower this week as prices pulled back from highs of over $2,400 an ounce seen in mid-April.

 

 

 

 

 

 

 

 

 

 

 

 

 

KAU/USD 1-hourly Kinesis Exchange

US initial jobless claims figures released Thursday came in at 208,000 in the week to April 27, showing only a slight reduction against forecasts of 212,000. Meanwhile, US factory orders for March rose by 1.6% from February levels, in line with market expectations.

The figures provided little convincing momentum in either direction, leaving gold to find tentative support at around the $2,290 an ounce level.

The US dollar fell against other major currencies through the afternoon after an earlier push higher, and this may have helped gold to climb back up off the lows on Thursday afternoon. Yields on US 10-year treasuries also fell later in the day, providing a supportive element for gold.

That said, gold continues to fight a headwind now that markets are broadly expecting US interest rates to stay on hold at least until the autumn, reducing the appeal of assets that don’t earn a yield.

Looking ahead, the markets will be watching out for Friday’s US non-farm payrolls, unemployment rate and ISM Services PMI figures, all of which relate to April, for the latest health check on the US economy.

Kitco Media

Frank Watson

Time to Buy Gold and Silver

 

 

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

Wall Street joins Main Street in the bear cave for next week as gold’s price momentum wanes

Wall Street joins Main Street in the bear cave for next week as gold’s price momentum wanes

The gold market had plenty to digest this week, with manufacturing and services sector data, nonfarm payrolls, and the FOMC rate decision, and while precious metals prices did see a boost from the Fed that effectively ruled out a hike and left room for a cut in Q2, the overall trajectory was down as Asian demand cooled somewhat and Mideast tensions fell off the front pages altogether.

After opening the week above $2,335 per ounce, spot gold twice failed to hold above $2,340 on Monday, and by the afternoon, it had begun its steady slog downward, hitting a weekly low below $2,283 at exactly noon Wednesday.

Then positive momentum returned to the market, and the release of the Federal Reserve’s interest rate announcement and Fed Chair Powell’s press conference in the afternoon launched gold back above $2,325 per ounce.

But after a second attempt to breach that level, bullish momentum dissipated once again, and markets saw gold slide back down to support around $2,300 per ounce, where apart from the occasional test of $2,290, it languished for the rest of the week.

The latest Kitco News Weekly Gold Survey has experts as pessimistic as they’ve been in some time about gold’s near-term prospects, while most retail traders still see gold prices falling or chopping sideways.

FXTM Senior Research Analyst Lukman Otunuga said the signals are bearish for bullion in the coming days. “Gold prices are flashing red, surrendering initial gains from the downbeat US jobs report,” he noted.

Adrian Day, President of Adrian Day Asset Management, was among those who still believe in gold for the coming week.

“Gold’s resilience in the face of delays in cutting rates, by the Federal Reserve primarily as well as some other central banks, is powerful and telling,” Day said. “Whoever is buying gold – and we know that it is primarily global central banks and Chinese savers – is buying for reasons other than the traditional macro-economic factors that would lead to a higher gold price. This buying is largely price agnostic, and likely to continue.”

Marc Chandler, Managing Director at Bannockburn Global Forex, sees the balance of near-term trading tilted to the downside next week, as he expects to see Asian demand dialing back.

“Gold consolidated in recent days and the key issue is whether it is a consolidation pattern or a bottoming formation,” he said. “I suspect the yellow metal can have another leg lower toward $2250-60.”

Chandler said improved support for the yuan may further soften Chinese retail demand for gold. “Also note that HK stocks and mainland stocks that trade in HK have exploded for the past week and a half and this may reduce the urgency of seeking the safety of gold for some investors,” he added. “The recovery of the yen may also slow the local demand.”

For his part, Adam Button, Head of Currency Strategy at Forexlive.com, expects Chinese demand to pick up after domestic traders return in force.

“China is back from holiday next week and will likely resume buying,” he said.

This week, 15 Wall Street analysts participated in the Kitco News Gold Survey, and after two weeks of downward consolidation, most see gold sliding further in the near term. Only four experts, or 27%, expected to see gold prices climb higher next week, while five analysts, representing 33%, predicted a price drop. Six experts, or 40% of respondents, see gold continuing to trade sideways.

Meanwhile, 217 votes were cast in Kitco’s online poll, with only a minority of Main Street investors expecting prices to move higher in the near term. 102 retail traders, representing 47%, looked for gold to rise next week. Another 61, or 28%, predicted it would be lower, while 54 respondents, or 25%, expect the precious metal to trend sideways in the week ahead.

Next week will be among the lightest of the year for economic data releases. The main highlights, such as they are, will be Wednesday’s 10-year bond auction, the Bank of England’s monetary policy decision and the Treasury’s 30-year bond auction on Thursday, and the Friday release of Preliminary University of Michigan consumer sentiment.

Chandler noted the absence of major indicators on the docket for next week, and said he’ll be watching the sovereign bond market for clues on the market’s potential direction. “After the FOMC and jobs data, next week looks quiet, but large Tsy supply with bills and quarterly refunding,” he said.

Darin Newsom, Senior Market Analyst at Barchart.com, was reflecting on this week’s bumper crop of economic indicators.

“I don't think we learned anything we didn't already know about the U.S. economy,” Newsom said. “The key takeaway for me this week is that the monthly employment data is strictly for entertainment purposes, and not information. It's just hilarious to watch it come out every month and be hundreds of thousands off from the quote-unquote experts’ opinions on what it should be.”

“It’s a very high-profile game of pin the tail on the donkey, and nobody plays it very well.”

Newsom said that other things are revealing the true state of the economy. “There are some cracks showing up in the U. S. economy, finally, that haven't been in place for quite some time,” he said. “We saw Starbucks earnings come in, and what was interesting about Starbucks is it wasn't just sales were down because of the higher price of the commodity itself, given the recent rally in coffee. It was actual sales, people in the door that were down. U.S. consumers might actually have started to change some of their habits and cutting that six- to eight-dollar cup of coffee out every morning.”

Another sign that the U.S. consumer may be weakening was the steep decline in demand for boxed beef last month. “We saw a sharp drop-off there at a time when these markets usually are going up as retailers are buying ahead of the summer grilling season, the biggest demand time of the year,” Newsom said. “Are U.S. consumers finally starting to tighten the belt after years of everyone telling them how terrible the situation was? Have they finally started tightening the belt to where they're cutting out that cup of coffee every day, where they're not buying the expensive cuts of meat?”

“These to me were the two key things that we saw this week,” he said. “Everything else just fit with what we already knew: there's still inflation, both sides of the aisle are going to argue, it's bullish, it's bearish, whatever. But our reads on what some of these key consumer markets are doing, I think it's more important.”

As for what all this means for the gold market, Newsom sees some exhaustion on the side of the bulls, which he thinks is understandable given gold’s recent run-up.

“June gold is close to finishing off its short-term downtrend midday Friday,” he said. “This means a bullish technical reversal is possible either today or Monday. The market is technically oversold short-term as well.”

“The short-term downside target is still $2,268 with June sitting near $2,300 Friday.”

Newsom compared gold’s current position to another popular commodity. “I certainly can't make a nice hot cup of it, but to me, it reminds me of cocoa,” he said. “Cocoa ran up so high on fundamental factors that it ran out of buyers and has collapsed.”

“Gold went to new all-time highs,” Newsom noted. “And while there's always going to be Middle East tension, there's always going to be some sort of currency questions around the world, and inflation hasn't gone away, it simply ran out of buyers. There was a vacuum underneath the market, which is why when it finally gave some short-term technical signals that were bearish, it certainly seems to be what's played out [earlier this week].”

He underlined, however, that there are still plenty of medium and longer-term factors supporting gold demand.

“We still have inflation,” he said. “It still looks like interest rates are going to be cut at least once this year, that should weaken the U.S. dollar and should create more of an inflationary environment. And the Middle East isn't going away. As I've said for quite some time, the closer the U.S. gets to its next election, the more chaos around the world we're going to continue to see in hopes of swaying the election one way or the other. So gold's still going to be the play. I think it's going to find some buyers down here, I think the algorithms are going to kick back in.”

Taking all of this into account, Newsom said that the long-term outlook for gold hasn't changed. “It's still probably the best hedge against everything that's going on,” he said. “It just needed to take a breather and hit a vacuum where there wasn't as much buying interest.”

And Kitco Senior Analyst Jim Wyckoff said the technical picture still supports high gold prices next week. “Steady-higher as charts remain overall bullish,” he said.

Spot gold last traded at $2,301.56 per ounce at the time of writing, down 0.10% on the day and down 1.56% on the week.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

 

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

Gold Price News: Gold Falls Sharply Below 2300 as US Data Points to Inflation

Gold Price News: Gold Falls Sharply Below $2,300 as US Data Points to Inflation

Market Analysis

Gold prices saw a sharp sell-off on Tuesday, pushing prices to their lowest level for a week, as economic figures pointed to high inflation, indicating lower chances of interest rate cuts any time soon.

It was one-way traffic on Tuesday with prices consistently moving lower through the day, falling as low as $2,294 an ounce. That compared with around $2,335 an ounce in late deals on Monday – a loss of roughly $40 in a single day. The sharp slide has taken prices back to levels last seen on April 23.

KAU/USD 1-hourly Kinesis Exchange

Euro Area GDP figures for Q1 came out on Tuesday showing stronger than expected growth, both on a quarter-on-quarter and year-on-year basis. Compounding this, the US employment cost index for Q1 released later in the day also came in above forecasts. Taken together, the latest figures indicate relatively high inflation, and this strengthens the argument for central banks maintaining interest rates at current levels.

The markets have been dialling back bets on the US Fed’s expected start of interest rate cuts taking place as soon as June. The latest figures from interest rate traders shows that bets are roughly 50-50 on a continuation of existing rates in September or a cut. A slightly stronger majority favour the first cut in November. The US Fed’s FOMC is set to meet May 1, followed by subsequent meetings in June, July and September.

Eventual interest rate cuts are seen as supportive for gold prices because they reduce the opportunity cost of holding non-yield-bearing assets like gold and silver.

Looking at a one-month gold price chart, Tuesday’s drop could prove significant if trend line support fails to hold at around $2,300 an ounce, which was the recent low seen on April 23.

Looking ahead, the markets will be watching out for Wednesday’s US ISM manufacturing PMI figures for April and JOLTs job openings numbers for March, as well as keeping an eye out for any signals from the US Fed’s meeting and subsequent press conference.

Kitco Media

Frank Watson

Time to Buy Gold and Silver

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

Gold Futures Tumble Below 2300 as Traders Brace for Fed’s Hawkish Pivot

Gold Futures Tumble Below $2,300 as Traders Brace for Fed's Hawkish Pivot

Gold Futures Tumble Below $2,300 as Traders Brace for Fed's Hawkish Pivot teaser image

Gold futures prices plummeted on Tuesday, dipping below the crucial $2,300 per ounce level, as traders braced for a potential hawkish shift from the Federal Reserve in its upcoming policy decision. The precious metal, often viewed as a hedge against inflation, came under intense selling pressure amid concerns that the central bank could strike a more aggressive tone on future rate hikes.

As of 5:15 PM EDT, gold futures for the most active June contract traded $60.50 lower, or 2.57% down, settling at $2,297.20 per ounce. The sharp decline in prices reflects genuine apprehension among market participants that the Federal Open Market Committee (FOMC) meeting might conclude with a notable change in language regarding inflation and monetary policy.

Traders widely anticipate that Federal Reserve Chairman Jerome Powell will deliver a much more hawkish press conference, potentially signaling a slower pace of rate cuts or even a pause in the central bank's easing cycle. This sentiment gained traction after Powell recently acknowledged that current levels of inflation would require more time to achieve the 2% target, stating, "Inflation has eased over the past year but remains elevated."

Market observers expect Powell to highlight the recent strong economic indicators, including the core Personal Consumption Expenditures (PCE) index for March and the robust Gross Domestic Product (GDP) numbers. These data points could prompt the Federal Reserve to adopt a more cautious approach toward upcoming rate cuts, diverging from earlier expectations of more aggressive easing.

The latest inflation data revealed that the headline Consumer Price Index (CPI) rose 3.5% year-over-year in March, while the core rate of inflation, excluding energy and food costs, advanced to 3.8% annually. This development could significantly alter the Federal Reserve's stance on the number and timing of rate cuts this year. Initially, the Fed had projected three quarter-point rate cuts through a series of moves, but market participants now anticipate only one or two smaller cuts, potentially occurring later in the year.

According to financial experts, the FOMC's potential shift in language regarding inflation and monetary easing bears significant implications for the markets. An acknowledgment of sustained high inflation rates could dampen hopes for imminent rate cuts, altering investment landscapes and risk assessments. If the FOMC opts to reduce the cap on Treasury balance sheet run-off, this could be interpreted as a cautious step towards tightening, albeit less aggressively than an outright rate hike.

The prospect of a more hawkish Federal Reserve, combined with the prevailing dollar strength, has exerted downward pressure on gold prices, driving futures below the critical $2,300 per ounce level. As traders await the FOMC's decision, the precious metal's trajectory will likely hinge on the central bank's assessment of inflation risks and its subsequent policy adjustments.

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

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