Posted on 06/20/2019 6:04:23 AM PDT by Migraine
(Kitco News) - Gold and silver prices are sharply higher in early morning U.S. trading Thursday. Gold powered to a five-year high, while silver prices hit a five-week high. Major central banks that are leaning easy on their monetary policies are boosting the metals and the raw commodity sector, in general. Gold is also seeing increased safe-haven buying interest as tensions in the Persian Gulf are on the rise. August gold futures were last up $37.50 an ounce at 1,386.50. July Comex silver prices were last up $0.417 at $15.385 an ounce.
Traders and investors are still digesting Wednesday’s conclusion of the Federal Open Market Committee (FOMC) meeting that saw no change in U.S. interest rates, but the Fed did lean significantly more dovish. The FOMC statement said the committee would lower interest rates in the coming months if U.S. economic growth begins to slow down. The FOMC expects the U.S. economic expansion to continue but “uncertainties about this outlook have increased,” the statement said. About half of the FOMC members now expect the Fed to make at least one interest rate reduction this year. The FOMC statement also eliminated the word “patient” from its monetary policy stance.
Markets are continuing to react to the dovish Fed meeting and also to European Central Bank President Mario Draghi’s easy stance on monetary policy in comments he made earlier this week. The U.S. dollar index has sold off, the Euro currency has rallied, crude oil prices have surged and U.S. stock indexes have pushed higher and within easy striking distance of their record highs. European and Asian stock indexes were also mostly higher overnight.
The Bank of England and Bank of Japan also hold their regular monetary policy meetings yet this week.
Gold is also seeing safe-haven demand today on reports Iran’s military shot down a U.S. military drone in Iranian territory. Also, a missile struck a Saudi Arabian water plant, and Iran is being blamed. The U.S.-Iran stare-down just got ratcheted up another notch. President Trump is now likely closer than ever to unleashing some degree of a military operation against Iran. It’s a good bet this situation will get worse before it gets better.
The key “outside markets” today see Nymex crude oil prices solidly higher and trading just above $55.00 a barrel. Meantime, the U.S. dollar index is lower on good follow-through selling from solid losses posted Wednesday afternoon in the wake of the dovish FOMC statement.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, leading economic indicators and international transactions (current account).
Technically, the gold bulls have the solid overall near-term technical advantage and gained more power today. Prices are in a seven-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $1,400.00. Bears' next near-term downside price breakout objective is pushing August futures prices below solid technical support at $1,361.50. First resistance is seen at $1,390.00 and then at today’s high of $1,397.70. First support is seen at $1,375.00 and then at $1,370.00. Wyckoff's Market Rating: 8.5
July silver futures bulls now have the overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $16.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.625. First resistance is seen at the overnight high of $15.40 and then at $15.50. Next support is seen at $15.25 and then at the overnight low of $15.12. Wyckoff's Market Rating: 6.0.
“i’m thinking this morning might be a good time to buy a couple tubes of liberties or buffaloes“
Platinum, rarer than gold, is still at a very low relative price.
What's that all about?
Why thank you. Glad you recognized your flaw.
Gold shoots up on the risk of recession? Up gold and down economy are seldom seen in tandem. But opinions vary I'll concede. But there's no reason to play the insanity card.
It’s all about the Fed manipulating rates at the short end.
This Dynamic Yield Curve animation makes it clear to see.
Click Animate:
https://stockcharts.com/freecharts/yieldcurve.php
And yet the markets have been pushing down U.S. Treasury rates — the benchmark for many consumer and business loans in the U.S. — even while the Fed was raising its own discount rate.
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Actually, the Prime Rate moves in lock step with the Fed’s funds rate.
>> Gold shoots up on the risk of recession? <<
Absolutely. Gold is a hedge. No matter of opinions varying; this is first-day-of-class Finance 101 stuff.
The bond market is convinced a recession is coming, because of the end of the y/y tax and spend stimulus from the Trump tax cuts and spending boom. The stock market is bullish though because they’re convinced the Fed is going to lower rates in the coming months, and they’re very likely right about that.
Finance 101? I doubt it. Finance 101 primarily covers macro-financial policies, not individual investing. From the Wharton course description for Finance 101: "The goal is to provide a unified framework for understanding macroeconomic events and policy, which govern the global economic environment of business. The course analyzes the determinants and behavior of employment, production, demand and profits; inflation, interest rates, asset prices, and wages; exchange rates and international flows of goods and assets; including the interaction of the real economy with monetary policy and the financial system."
In my experience and opinion, investing in physical gold is a fools game. Gold does not generate or provide income, dividends, or share splits; gold does not have intrinsic value; although gold is is used in the manufacturing of goods, there is no shortage of supply that drives the price. Rather, the price of gold as an investment is primarily driven by emotion - hype, fear, and uncertainty - which is part marketing strategy by the people who sell gold as an "investment."
No, Finance 101 because the flight of money from growth-yielding investments to hedges is very, very much a macroeconomic policy matter. But you’re sorta right, I guess.... although it’s very basic, they probably wouldn’t cover it for a few units.
And yes, gold is a foolish investment EXCEPT as a hedge. The point is that when everyone else is crashing and burning, you’ll have some cash to buy very cheap.
This is what I don't understand: From my research, the claim that gold is a hedge against inflation comes mostly from the people who sell gold, and the people who brought gold because the seller convinced them that gold is a hedge against inflation. But I have yet to find any disinterested research that concludes that gold is a better hedge than treasury notes or bonds, for example, that are held to maturity. How specifically is gold a hedge if it has no intrinsic value and the price is primarily set by demand? Realistically, I can't use physical gold to pay for goods and services, and therefore, I would have to convert the gold into cash. But during a severe recession or hyper-inflation, there is no guarantee of sufficient demand to support the price, and as a result, I might have to sell the gold for less than what I paid.
Yes, I agree that gold is a hedge. But it is a hedge against inflation, not recession. Gold goes flat in a recession. Thanks for the condescending lesson, though.
Gold does NOT go flat in a recession. In fact, the only two “recessions” it was flat in, were the the two “recessions” caused by inflation caused by surges in the price of oil caused by the two Persian-Gulf wars. In other words, if you sought gold as a hedge against inflation, you lost out. In every OTHER recession, you made out.
But yes, if you get your financial advice from con-men on conservative talk radio, you’d certainly learn that gold is a hedge against inflation.
(Keep in mind that those con men telling you to buy gold are trying to sell it themselves.)
Once again, you give a nice lesson in condescension. No thanks, though.
I don’t listen to con men on the radio or anywhere else. I have made a serious study of gold price fluctuations since the early 80s. And, while I don’t FULLY get all the varying strands of causation, I do have a feel for it. I have put my money where my mouth is and have done well. It has afforded a lower-middle class guy to retire very comfortably; and for that I am grateful to God, most especially.
My main interest in physical is for the SHTF aftermath, when nobody’s currency will be trusted.
Meanwhile, I kick back, with my finite, inferior understanding of gold prices, which lately have been largely moved by big central bank game-playing (the Chinese, Russians, Saudis and others) where they manage to go long, chase the price up $100, go short, and drive the price down $100; rinse and repeat, over the past 10 years or so. I think they use proxies, oligarchs. It’s been uncanny.
I am excited by what may be a breakout.
Look, I’m sorry if I “mansplained” to you. But when you say stuff that is plainly counter-factual, like that gold flattens before a recession or deny that gold is a recession hedge, I can only presume you’ve never looked at a historical chart of the price of gold.
This market reaction puts the lie to claims that we’re in a slowdown and about to enter recession, it’s justpartisan talking down by Democrats hoping to campaign on a weak economy in 2020.
Had that actually been the case, we’d have seen no such activity in PM’s.
When the cyclical back and forth starts getting noticed outside of large investors they will short-circuit that. The same thing was going on in currencies for two years back in Obama’s second term, it was really the only decent return out there for small fry such as myself. Dollar takes off, making Euro, Franc or Yen look like a bargain, go into one of those then wait six months for the downward dollar spike. It went on like clockwork then it didn’t.
This PM reaction says to me that the market believes the US economy is strong, otherwise holding steady on rates would have received a different reaction. Gold and other PM’s spiking is either due to inflationary fears or economic instability due to other factors.
I don’t think you’re seeing a “breakout” therefore, and won’t until there is economic trouble in the US. We’re not there, not now.
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The private banks have this country just about where they want it.
The interest on the debt will soon outstrip all other in the budget.
Then what?
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DUH! Then the Leftists raise taxes...BIGLY, w/ the “begrudging” support of their voluntary political stooges, the (R)N(C).
What? You *think* that govt would SHRINK??
LOL
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