Please take a look at the graph below. These futures left their competitors far behind with a tremendous gain of almost twenty percent in only one month.
Chart courtesy of finviz.com
On a one-month horizon, silver's meteoric price increase is undeniable. None of the metals can even come close. Copper is lagging eight percent behind as gold futures show only half the performance of silver. By the way, I am about to show you the relative dynamics of these top metals in the chart below.
The chart above visualizes the comparative superiority of silver futures over gold futures that we revealed in the first graph. The white metal has been reversing its nine-year losses since the bottom of 2011 at 30 oz up to the all-time high at 127 oz in 2020, where the large age long cycle has been completed. Continue reading "Poor Man's Gold Shines The Brightest"→
The Merriam-Webster dictionary defines sentiment as, “an attitude, thought, or judgment prompted by feeling: predilection.: a specific view or notion: opinion.: emotion.: refined feeling: delicate sensibility especially as expressed in a work of art.: emotional idealism.”
As it pertains to the financial markets, market sentiment is the view or attitude that creates our opinion as to whether an asset class is overvalued or undervalued. It shapes and changes the value of a stock or commodity’s price.
Market sentiment is overly sensitive to statements and comments made by Federal Reserve officials because those individuals have the power and influence to change monetary policy.
There is a dramatic difference between the perception of upcoming Federal Reserve monetary policy changes and the actions of Federal Reserve officials.
The Federal Reserve raised rates at every FOMC meeting this year except in January, from March through November, a total of six rate hikes. Over the last four FOMC meetings (June, July, September, and November) they raised rates by 75 basis points.
The aggressive nature of the Federal Reserve’s monetary policy moved gold dramatically lower from March up until the beginning of November. Gold traded to its highest value this year of $2078 in March. By the beginning of November, gold prices had dropped to approximately $1621, resulting in a price decline of 21.99%.
During the first week of November, market sentiment shifted because inflation rates had declined fractionally, and investors viewed this fractional drop as a signal that the Federal Reserve would begin to loosen its aggressive monetary policy. This caused gold to rise dramatically from $1621 to an intraday high of $1792 by Tuesday, November 15. Continue reading "Gold Market Sentiment Adjusts To Recent Fed Comments"→
The gold futures have skyrocketed on better than expected U.S. inflation data last week. The annual inflation rate in the U.S. slowed for a fourth month to 7.7% in October, the lowest reading since the start of a year, and well below forecasts of 8%.
Source: TRADING ECONOMICS
According to logic, the gold price should fall as anti-inflationary tightening measures have shown positive results in cooling price growth. The printing press, represented by the M2 money supply indicator (black dotted) in the chart above, has stopped and the reading is declining as well.
Let us check the chart below to look for an answer in the fundamental data of world gold demand.
Courtesy of World Gold Council
The graph above shows the quarterly data of demand statistics in the period from Q3 2021 to Q3 2022. According to the data, the most stable demand source comes from a technology side (wine-colored). The jewelry demand (dark purple) is price sensitive: it shrinks on the rising price and expands during price falls. The investment demand (dark green) is cooling down amid the tightening as per the logic I explained above. Continue reading "Can Central Banks See What We Don't?"→
It’s all about persisting inflation at the end of the day. All markets watch how the Fed tries to fight it as aftershocks of rate decisions are observed in bonds, stock market, foreign exchange, precious metals and even crypto.
Source: TradingView
The graph above visualizes that “fight of the night”. Indeed, we witness some progress of the Fed’s efforts in the falling U.S. inflation (red line) numbers from the peak of 9.1% in the summer down to the latest data of September at 8.2%, which was still above the expected 8.1%.
The 3% increase of the Fed rate (blue line) brought inflation down only by 0.9%. It is way too slow, as the inflation target of 2% is still way too far, hence the Fed could keep their aggressive tightening mode.
Surely, there is a time lag between the Fed action and the inflation reaction. However, the time is ticking away as inflation is like a fire - the earlier it's extinguished the better.
The real interest rate (black line, down pane) crossed over the August top above the -5.1%. The next resistance is at -3.7% (valley of 2011) and it is highly likely to be hit soon as it is only 1.2% away. The valley of 2017 in -2% is almost 3% away, which means a huge Fed rate hike or a big drop of inflation. We can’t rule it out anyway.
Friday’s jobs report for September showed a decrease in monthly gains, with 263,000 new jobs added last month, a decline from the prior month in which 315,000 new jobs were added.
The deep impact it had on almost every asset class in the financial markets was not because of the tepid numbers but rather hopes by the Federal Reserve that these numbers would be even lower.
The Federal Reserve had hoped that Friday’s report would reveal even slower growth because that would indicate progress by the Federal Reserve in reducing inflation.
Inflation is still greatly elevated at a 40-year high even after the Federal Reserve has raised interest rates at every FOMC meeting since March. The Fed raised rates by 25 basis points in March, 50 basis points in May, and 75 basis points in June, July, and September. The Fed took their benchmark Fed funds rate from between 0 and 25 basis points in February to between 300 and 325 basis points in September.
Although Friday’s report indicated slowing job growth it is believed that this contraction is not enough for the Federal Reserve to slow down its current pace of interest-rate hikes. Continue reading "How to Interpret the Jobs Report"→
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