Critical Report Due Out On Wednesday

Chairman Powell’s testimony before Congress this week painted a dire economic outlook which will include the continued contraction of the national GDP coupled with continued interest rate hikes.

During his testimony, it was evident that there was a subtle difference in his word track that was uncharacteristic and a dramatic change from his usual refined method.

The chairman made it clear that the Federal Reserve has one goal in mind above all others and that is to reduce the level of inflation. They emphatically stated that the actions of the Federal Reserve will most likely lead to a recession rather than a soft landing.

Yahoo finance captured his overall demeanor in a most articulate manner saying, “He said a recession caused by the Fed’s own monetary tightening remains a “possibility.”

A soft landing, with higher rates but a still-healthy economy, would be “very challenging” to achieve. And Powell said the Fed’s fight against inflation was “unconditional,” meaning nothing will stand in its way.”

The revisions by the Federal Reserve to their monetary policy most certainly would contract the economy and bring on a recession.

A recession is defined as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”

The last GDP report revealed that the United States had an economic expansion leading to a 6.9% growth in the GDP for Q4 of 2021. If advanced estimates for the GDP Q1 are correct it will indicate a decrease in the real gross domestic product (GDP) for the first quarter of this year.

The last occurrence of a contracting GDP quarter to quarter occurred during Q2 of 2020. However, the following quarter (Q3 2020) revealed a robust increase in national GDP.

This is why next week’s report is so critical. On Wednesday, June 29 the BEA (Bureau of Economic Analysis) will release the U.S. GDP first-quarter report.

According to the advanced estimate released on April 28, “Real gross domestic product (GDP) decreased at an annual rate of 1.5 percent in the first quarter of 2022, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 6.9 percent.”

Currently, there is a high probability that the actions of the Federal Reserve will lead to a recession. The question is not whether or not the United States will enter recession but rather when the recession will begin and how long the recession will last.

Daily Gold Chart

While a recession can stabilize gold pricing, and higher inflation certainly creates a bullish undertone for the precious yellow metal, rising interest rates have become a primary focus on the future price of gold and has pressured pricing lower since March of this year.

Gold has declined just over 12% from the highs of $2070 in March to gold’s current pricing of $1828. While it seems as though there is strong support for gold at $1800 depending on how aggressive the Federal Reserve becomes in regard to further rate hikes.

Besides the GDP report due out on Wednesday, on Thursday the government will release its latest core inflationary numbers when the U.S. PCE price index report is published.

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

Wishing you, as always good trading,
Gary S. Wagner
The Gold Forecast

Strong Jobs Report Supports Continued Monetary Tightening

A Bloomberg survey of economists indicated that the medium estimate for jobs added in May would show that approximately 318,000 new jobs were added. Additionally, the survey also predicted that the unemployment rate would fall to 3.5%. A Wall Street Journal survey of economists forecasted that employers would add 328,000 jobs in May. The survey also anticipated that the unemployment rate would fall to 3.5%. Both surveys underestimated both the number of jobs added in May 2022 and the unemployment rate.

The U.S. Bureau of Labor Statistics released the latest jobs report, which said, “Total nonfarm payroll employment rose by 390,000 in May, and the unemployment rate remained at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, in professional and business services, and in transportation and warehousing. Employment in retail trade declined.” Continue reading "Strong Jobs Report Supports Continued Monetary Tightening"

Inflation: Is The Glass Half Empty Or Half Full?

The inflation rate rose 0.2% in April; is the glass half empty or half full?

Today the BEA (Bureau of Economic Analysis) released the PCE (personal consumption expenditures) for April 2022. This report is the preferred inflation gauge used by the Federal Reserve as a key component to shape their forward guidance of monetary policy. Continue reading "Inflation: Is The Glass Half Empty Or Half Full?"

Gold Posts Solid Gains For The Week

Gold prices closed higher on the day and the week resulting in solid gains. As of 5:50 PM, ET gold futures basis most active June contract is currently up $3.90 or 0.21%, fixed at $1845.10. Considering that gold futures traded to a low this week of $1785 and closed near the highest value this week of $1848.60, it had a good week.

Gold pricing had been under pressure for the fourth consecutive week before this week's trading activity resulting in defined technical chart damage with it breaking below its 200-day moving average last Thursday, May 12. This week's low occurred on Monday, May 16, when prices hit a low of $1785 and traded to a high of $1825 before closing above its opening price on Monday and above Friday's closing price at $1813.60. On Tuesday, gold traded to a higher high and a higher low than Monday, even though gold closed fractionally lower than its opening price. On Wednesday, gold traded to a lower low and a lower high than Tuesday's price action, but that all changed on Thursday. Continue reading "Gold Posts Solid Gains For The Week"

Gold Suffers Its Fourth Straight Week Of Declines

Editor’s Note: I will be speaking at an upcoming conference The Vancouver Resource Investment Conference in British Columbia on May 17 and 18. For more information please click the link above.

Gold opened at $1977 on Monday, April 18, and this would mark the beginning of four consecutive weekly declines. As of 5:10 PM EDT gold futures basis, the most active June 2022 Comex contract is fixed at $1810.30 after factoring in today’s decline of $14.30 or 0.78%. Today’s decline in gold occurred without the benefit of dollar strength. The dollar index declined by 0.36% and is currently fixed at 104.515

Kitco Gold Index (KGX)

The image above is a screen-print of the KGX (Kitco Gold Index) which was taken at 4:37 PM EDT. At that time spot gold was fixed at $1810.80 after factoring in a decline of $10.70. Market participants were active sellers resulting in a $14.30 price decline. Dollar weakness provided mild tailwinds adding $3.60 (+0.20%) in value. Continue reading "Gold Suffers Its Fourth Straight Week Of Declines"