Gold sees Fed-induced brief stretch, can it final?

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(Kitco Information) – Sentiment shortly shifted in gold and silver as hedge funds continued to extend their bearish bets forward of the Federal Reserve’s financial coverage determination final week, in keeping with knowledge from the Commodity Futures Buying and selling Fee.

Though the most recent Merchants Dedication report confirmed a slight enhance in bearish sentiment in gold and silver, some analysts famous that the info seemed again as costs have recovered, buying and selling at three-week highs.

Analysts famous that gold noticed a aid rally as buyers and merchants anticipated the Federal Reserve to be extra hawkish final week. Analysts stated that whereas the US central financial institution maintained its aggressive tightening posture, there was little change in its stance.

Federal Reserve Chairman Jerome Powell stated that the central financial institution could be justified in slowing the tempo of price hikes because the financial system begins to answer its aggressive financial coverage.

“After the monster liquidation seen of late, and with Fedspeak seeing the market transfer away from pricing in a 100bp hike, lengthy positions within the yellow steel shortly rebounded after costs broke by the $1700/oz degree. Moreover, with the Fed elevating charges 75bp, and “Chairman Powell indicated that the Fed might gradual its price hikes on the subsequent assembly, gold bugs have obtained an additional reprieve because the ensuing brief cowl has seen costs surge to finish the week,” stated commodity analysts at TD Securities.

The CFTC’s Separate Dealer Commitments Report for the week ended July 19 confirmed cash managers elevated their speculative gross lengthy positions in Comex gold futures by 1,160 contracts to 92,216. On the identical time, brief positions elevated at a quicker clip, by 1,515 contracts to 111,309.

Gold web brief positions elevated by 19,093 contracts. In the course of the evaluation interval, gold costs briefly dipped beneath $1,700, hitting a one-year low. The gold market has seen growing bearish positions over the previous 5 weeks. Nevertheless, analysts famous that gold seems overbought and ripe for a short while.

TD Securities, stated that whereas costs have room to maneuver greater, they’ve taken a tactical brief place in gold because the market seems overbought following the Fed’s bounce.

“We entered a tactical brief place in gold, anticipating a repricing in anticipation of the Fed will exacerbate ongoing outflows within the yellow steel, resulting in decrease costs,” the analyst stated.

In a current interview with Kitco Information, Phillip Streible, chief market strategist at Blue Line Futures, stated he would look to take income as gold costs surged nearer to $1,800 an oz.

Streible added that the market could also be too early to anticipate a pivot from the US central financial institution. He famous that the most recent inflation knowledge reveals shopper costs stay excessive, which might drive the Fed to keep up its aggressive stance longer than anticipated.

Together with gold, hedge funds stay aggressively bearish on silver. The separate report confirmed money-managed speculative gross lengthy positions in Comex silver futures rose by 310 contracts to 36,721. On the identical time, brief positions elevated by 4,087 contracts to 54,539.

Silver positions have been web much less at 17,818, up 26% from the earlier week. In the course of the evaluation interval, silver costs maintained help at $18 an oz.

Identical to gold, silver has seen a powerful rebound following final week’s rate of interest hike. Though the gold/silver ratio has declined from two-year highs, it stays elevated at round 87 factors.

Whereas silver costs at the moment are buying and selling firmly above $20 an oz, some analysts fear that the rally is unsustainable as the specter of a recession will increase.

The recession will result in decrease industrial use for silver, which represents greater than 50% of demand for the dear steel.

Disclaimer: The views expressed on this article are these of the writer and should not mirror the views Kitco Metals Inc. The writer has made each effort to make sure the accuracy of the knowledge supplied; nevertheless, Kitco Metals Inc. nor the writer can assure such accuracy. This text is for informational functions solely. It’s not a request to make any change in commodities, securities or different monetary devices. Kitco Metals Inc. and the writer of this text accepts no duty for loss and/or harm arising from using this publication.

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