Tag: The Gold Forecast

Gold Market Sentiment Adjusts To Recent Fed Comments

Posted on by The INO.com Team

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" →

How to Interpret the Jobs Report

Posted on by The INO.com Team

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.

Bloomberg Jobs Graph

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" →

Inflation Continues To Spiral Higher

Posted on by The INO.com Team

Key reports released last week in both the United States and the Eurozone revealed what global citizens have been acutely aware of. Inflation continues to spiral higher and at a staggering level.

This prompted Credit Suisse to issue a dire global economic outlook, saying that the “worst is yet to come”.

US Inflation Gauges

The Commerce Department released the latest inflation numbers vis-à-vis the PCE that revealed that the Core PCE jumped 0.6% in August. It shows that inflation is still intense and increasing.

The preferred gauge used by the Federal Reserve, the PCE (Personal Consumption Expenditures Price Index) revealed that inflation accelerated even more than expected in August. On a year-over-year basis, the core PCE which omits food and energy costs increased 4.9%, above projections of 4.7%. Continue reading "Inflation Continues To Spiral Higher" →

September FOMC Meeting - How Might Gold Respond

Posted on by The INO.com Team

The Federal Reserve will conclude its September FOMC meeting and release a written statement at 2 PM EDT today. This will be followed by Chairman Powell’s press conference a half-hour later.

It is widely anticipated that the Federal Reserve will raise the “Fed funds rate” by 75 basis points. The CME’s FedWatch tool is forecasting that there is an 84% probability of a 75-basis point hike, and a 16% probability that the Fed will raise rates by a full percentage point.

In the unlikely event that the Federal Reserve raises its benchmark interest rate by 1%, it would most certainly pressure gold to lower pricing.

According to MarketWatch, “economists at the brokerage Nomura Securities … became the first on Wall Street to predict a full-percentage-point increase in the Fed’s benchmark short-term rate.”

Weekly Gold Futures Chart

However, if the Fed raises rates by 75 basis points as expected market participants could see some short-covering activity amid a relief rally. As of 5:05 PM EDT yesterday gold futures basis, the most active December contract is trading five dollars lower and is fixed at $1673.20.

The hard truth is that after four consecutive rate hikes beginning in March inflation remains extremely elevated and persistent. The latest data revealed that the CPI index had a slight decline from July’s 8.5% to 8.3% in August. While the headline CPI had a fractional decline the core CPI which strips out food and energy costs increased 0.6% more than double the prior month’s increase. This means that the core inflation rate climbed to 6.3% from 5.9% in August.

Because the August core inflation rate is three times the 2% target the Federal Reserve wants to achieve members of the Federal Reserve will continue the exceedingly hawkish tone expressed at the Jackson Hole economic symposium. Continue reading "September FOMC Meeting - How Might Gold Respond" →

Dollar Strength VS Gold Weakness

Posted on by The INO.com Team

Last Monday, August 15 gold opened at approximately $1816 per ounce and scored strong price declines over the last five consecutive days, characterized by four lower highs, and four lower lows taking the most active December contract of gold futures to $1760 with under a half hour of trading before closing for the weekend.

In a single week, gold lost $56 in value. Gold sustained a price decline of approximately 3.083% over the last five trading days.

Weekly Gold Futures Chart

This is significant but certainly not extremely rare. Historically speaking we can easily identify weeks in which gold had a significant drawdown greater than this week’s price decline. Only five weeks ago, during the week of July 4 gold sustained a weekly drawdown of $71. This represents a weekly price decline of 3.861%.

On the other hand, the gains last week in the dollar index are rare and I believe extremely significant.

Weekly DX Chart

In terms of percentage advance, gold did experience a larger percentage drop than the dollar gained. The weekly advance for the dollar index is 2.217%.

However, to identify the last instance the dollar declined this deep in a single week occurred during the week of March 16, 2020, well over two years ago. In a single week, the dollar index opened at 98.46 and closed at 103.48, a strong price advance of 502 points which is a weekly gain of 4.851% more than double last week’s gain. Continue reading "Dollar Strength VS Gold Weakness" →