Tag Archives: Gold

U.S. stocks finished lower on Tuesday for a second day as investors braced for the latest update on what has been the worst bout of inflation to hammer the U.S. economy in four decades. How stocks traded
The Dow Jones Industrial Average
DJIA,
-0.62%
retreated 192.51 points, or 0.6%, to 30,981.33.

The S&P 500
SPX,
-0.92%
was down 35.63 points, or 0.9%, 3,818.80.

The Nasdaq Composite
COMP,
-0.95%
shed 107.87 points, or 1%, to 11,264.73

On Monday, the Dow fell 164 points, or 0.5%, while the S&P 500 declined 1.2% and the Nasdaq Composite dropped 2.3%.

What drove markets After a fleeting rebound off the 18-month lows the S&P 500 index touched in mid-June, the mood was again cautious on Tuesday as the strong dollar weighed on sentiment ahead of Wednesday’s consumer-price index for June, while the second-quarter corporate earnings reporting season starts on Thursday. With the inflation report looming large on the economic calendar, investors appear reluctant to open new positions ahead of the data, even as the White House has preemptively dismissed the report as already out of date. “The overarching driver of trade today is the CPI report tomorrow and investors’ reluctance to get out directionally one way or the other in advance of it,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. See: U.S. inflation is still rising. Can it reach 9%? Traders remain wary about the prospects for corporate profits also amid signs of slowing global economic growth, although declining commodity prices have spurred hopes that the Federal Reserve might be able to transition back to cutting interest rates as soon as next year. “There’s been some talk of peak inflation in the US due — among other reasons — to a fall in some agriculture food prices. After all, it was the soaring prices of wheat, corn and other soft commodities, as well as energy, that have boosted inflation so much over the past year or so,” said Fawad Razaqzada, financial markets analyst at City Index. “With these prices coming down a little, this is clearly some good news — and some light at the end of the tunnel.” The drop in commodity prices, however, may not be reflected in the June consumer price index due Wednesday, he said. “So, just like May, there is a risk that inflation could overshoot again. If so, this will likely trigger fresh gains for the dollar.” See also: ‘The good, the bad and the ugly’: here’s how the market might react to the latest U.S. inflation data As for the dollar, investors are worried about how a surging U.S. currency may impact corporate earnings, Luschini added. “Investors are thinking about what it means in terms of tightening financial conditions, plus the fact that it will work to be counterproductive to earnings,” Luschini added. The dollar has soared versus major rivals in 2022, but pulled back from a 20-year high for the ICE U.S. Dollar Index
DXY,
+0.12%
Tuesday after the euro
EURUSD,
-0.02%
came tantalizingly close to hitting parity versus the U.S. currency for the first time in around two decades. Read: Euro pauses at parity. But what comes next? Big U.S banks will kick off the second quarter earnings reporting season proper in coming days, with JPMorgan Chase
JPM,
+0.10%
and Morgan Stanley
MS,
+0.16%
on Thursday, and Citigroup
C,
-0.13%
and Wells Fargo
WFC,
-0.48%
on Friday.

Expectations are for limited earnings growth. Analysts are forecasting an average 4.3% increase for companies in the S&P 500, which would be the weakest since the end of 2020, according to FactSet. Three months ago analysts were projecting growth of 5.9%, and the difference reflects building concerns that rampant inflation, and the consequent higher borrowing costs imposed by central banks to counteract it, have caused profit margins to compress. As for economic data Tuesday, the National Federation of Independent Business said its small-business optimism index fell 3.6 points to 89.5, the lowest level since the first few months of the pandemic in 2020. The index has declined during five of the past six months. Meanwhile, 34% of survey respondents said inflation is their primary concern, the highest percentage since 1980 — a sign that inflation has continued to hurt small businesses, which don’t share the pricing power of large corporations. The U.S. 10-year Treasury yield
TMUBMUSD10Y,
2.976%
fell 3.2 basis points to 2.958% as traders sought the relative safety of government debt. But the rally in Treasuries caused the closely followed spread between the two-year and 10-year notes to shrink to minus 8.5 basis points, its deepest inversion since Feb. 27, 2007. Companies in focus
Shares of PepsiCo Inc.
PEP,
-0.57%
finished 0.6% lower despite reporting fiscal second-quarter profit and revenue that were well above expectations, and which affirmed the beverage and snack giant’s full-year outlook.

Peloton
PTON,
+3.70%
shares climbed 3.7% after the fitness company announced it will outsource its manufacturing.

Cloud-computing giant ServiceNow Inc.
NOW,
-12.74%
fell sharply on Tuesday after its CEO discussed economic headwinds affecting the business during an interview with CNBC’s Jim Cramer. Shares were down 12.7%. Salesforce Inc.,
CRM,
-4.61%
a competitor and Dow component, appeared to decline in sympathy, with its shares falling 4.6%.

Boeing Company
BA,
+7.42%
shares surged more than 7% after reporting strong deliveries data for the second half of last year.

Other markets
Wall Street’s overnight dive left Asian bourses on the back foot. Hong Kong’s Hang Seng HK:HSI fell 0.9% and the Nikkei 225 JP:NIK in Japan slumped 1.8% after a measure of inflation hit 9.2%, higher than expected. The Stoxx Europe 600 XX:SXXP rose 0.5%, while the FTSE 100
UKX,
+0.18%
gained 0.2% in London.

The stronger dollar rippled across markets, pressuring products denominated in the buck. WTI crude CL.1 fell fell nearly 8% to its lowest level in three months. Gold GC00 futures settled 0.4% lower.

Bitcoin BTCUSD once again fell below $20,000, dropping 2.7% as of Tuesday afternoon. Continue reading →

Gold futures posted a loss for a second straight session on Tuesday, holding ground at their lowest finish since late September of last year. “The precious metal has been smothered by an appreciating dollar and expectations over the [Federal Reserve] maintaining an aggressive stance towards higher interest rates,” said Lukman Otunuga, manager, market analysis at FXTM. “The precious metal looks depressed and could be in store for more pain if the pending U.S. CPI report meets or exceeds market expectations” when it’s released Wednesday, he said. August gold
GCQ22,
-0.42%
fell $6.90, or 0.4%, to settle at $1,724.80 an ounce. Prices based on the most-active contract settled at the lowest since Sept. 29, 2021, FactSet data show. Continue reading →

(Bloomberg) — European stocks plunging 20%. Junk credit spreads widening past 2020 crisis levels. The euro sinking to just 90 cents.Most Read from BloombergThe predictions are ominous for financial markets if Russia cuts off all the gas supply to Europe.Shipments are currently running at reduced levels with the main pipeline shut for a 10-day maintenance, and fears are building over whether Moscow will turn the tap back on. Many investors are asking: How bad could this get?To that question, strategists across Wall Street have tried to put numbers on a scenario that would be unthinkable in normal times. There are so many variables, such as the length of any shutdown, the extent of supply cuts, and how far countries would go to ration energy, that anyone’s prediction is a guess at best.How Europe Became So Dependent on Putin for Its Gas: QuickTake“The big unknown is how the shock that starts in Germany, Poland and other central European countries will reverberate throughout the rest of Europe and the world,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “There simply is no substitute available for Russian gas.”In an analysis this week, UBS Group AG economists laid out a detailed vision of what they see happening if Russia halts gas deliveries to Europe. It would reduce corporate earnings by more than 15%. The market selloff would exceed 20% in the Stoxx 600 and the euro would drop to 90 cents. The rush for safe assets would drive benchmark German bund yields to 0%, they wrote.“We stress that these projections should be seen as rough approximations and by no means as a worse-case scenario,” wrote Arend Kapteyn, chief economist at UBS. “We could easily conceive economic disruptions that lead to more negative growth outcomes.”Markets are already pricing in some of the damage. The euro is at a two-decade low and on the brink of dollar parity. German stocks have lost 11% since June. German gas giant Uniper SE is the biggest corporate casualty, with the stock plunging 80% this year as it seeks a government bailout.To be sure, many investors say there’s reason to believe Russia will turn gas supply back on when maintenance on the Nord Stream 1 pipeline ends on July 21. But, as UBS points out, if European countries start voluntary gas rationing to fill up on storage, the hit to economic growth will be severe.“Europe is currently being caught in a vicious circle,” said Charles-Henry Monchau, chief investment officer at Banque Syz. Higher energy prices are hurting Europe’s economy, driving the euro lower. In turn, the weaker euro makes energy imports even more expensive, he said.The other worry is that central banks won’t be able to do much to help the economy with inflation already running at decade-highs, said Prashant Agarwal, a portfolio manager at Pictet Asset Management.“I am not sure central bank tools work in this scenario,” he said. “In the past, they had leeway to address the situation because inflation was low.”Here’s a round-up of other strategist views:BNP Paribas SAA full-blown gas disruption would drive the Euro Stoxx 50 to 2,800, about a 20% plunge from current levels, wrote strategists including Sam Lynton-Brown and Camille de Courcel.They recommend hedges, such as high-quality companies and buying options skew on the European stock index. Auto, industrial and chemical industries will be under pressure, they wrote.Nomura International PlcCurrency strategist Jordan Rochester has been urging clients to short the common currency since April. If Nord Stream 1 doesn’t resume operations, the euro may drop to 90 cents over the winter, he wrote.“We believe Europe may fail to build up sufficient gas storage for the winter and this may lead to energy rationing,” he said. “If that’s not an economic crisis, what is?”JPMorgan Chase & Co.The moves in European corporate bond spreads would be bigger than the first wave of the Covid pandemic in 2020 if Russia shuts off gas supplies, according to strategists led by Matthew Bailey.Spreads on high-grade debt may surge to 325 basis points, they wrote. For junk-rated bonds, the spread could widen to as much as 1,000 basis points.Goldman Sachs Group Inc.The euro is already reflecting a lot of the negativity, but the currency could fall another 5% if markets price in a full shutdown of Nord Stream 1, said strategists including Christian Mueller-Glissmann. They recommend a defensive allocation, with overweights on cash and commodities.Bank of America Corp.Former copper bull Bank of America also slashed its forecasts last week, warning that in a worst-case scenario where Europe experiences widespread gas shortages, prices could plunge to as low as $4,500 a ton. Copper sank 2% to $7,429 on Tuesday.Most Read from Bloomberg Businessweek©2022 Bloomberg L.P. Continue reading →

Editor’s Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today’s must-read news and expert opinions. Sign up here!

(Kitco News) – Gold prices are slightly up and silver prices weaker in early U.S. trading Tuesday. Gold hit an 8.5-month low overnight and silver a two-year low. The U.S. dollar index continues its assault on the major world currencies and that remains the main bearish element punishing the metals markets. Solidly lower crude oil prices today are also squelching the metals market bulls. August gold futures were last up $2.00 at $1,733.70. September Comex silver futures were last down $0.322 at $18.805 an ounce.
Global stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward modestly lower openings when the New York day session begins. Trader and investor risk appetite remains dented amid recession and inflation fears. Asian countries are also dealing with the worrisome spread of Covid.
The U.S. data point of the week will be Wednesday’s consumer price index report for June, which is seen coming in up 8.5%, year-on-year. In the May report, CPI was up 8.6% annually.
The key outside markets today see Nymex crude oil prices sharply down and trading around $99.00 a barrel. The U.S. dollar index is up and hit another 20-year high early today. The yield on the 10-year U.S. Treasury note is fetching 2.921%.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and chain stores sales indexes, the NFIB small business index, and the IBD/TIPP economic optimism index.

Technically, the August gold futures bears have the solid overall near-term technical advantage as prices hit an 8.5-month low overnight. Bulls’ next upside price objective is to produce a close above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at this week’s high of $1,743.00 and then at $1,750.00. First support is seen at today’s low of $1,721.60 and then at $1,710.00. Wyckoff’s Market Rating: 1.5

September silver futures bears have the solid overall near-term technical advantage as prices hit a two-year low overnight. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at the overnight high of $19.135 and then at $19.50. Next support is seen at the overnight low of $18.63 and then at $18.50. Wyckoff’s Market Rating: 1.0. Continue reading →

Editor’s Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today’s must-read news and expert opinions. Sign up here!
(Kitco News) – The gold market is at a discount to fair value; however, as long as the Federal Reserve continues aggressively tightening its monetary policy, investors are expected to remain on the sidelines, according to one market analyst.
In an interview with Kitco News, Huw Roberts, Head of Analytics at Quant Insight, said that while gold appears cheap compared to its fair value, macroeconomic conditions don’t support a new uptrend anytime soon.
He added that under QI’s modeling, gold’s fair value should be around $1,791 an ounce. The comments come as gold struggles to find new bullish momentum even as it holds long-term support above $1,730 an ounce. August gold futures last traded at $1,734.60 an ounce, down 0.41% on the day.
Roberts explained that QI evaluates gold’s fair value model based on, in very broad terms, economic growth, inflation, financial conditions, including real yields, yield curve and credit spreads, the monetary policy environment, and risk appetite.
Roberts added that the QI models show macroeconomic fundamentals are breaking down for gold, which could point to further weakness in the near term. He said investors using QI modeling are waiting for the macro picture to at least stabilize before buying the current dip.
“Although the model shows that gold is cheap, we don’t actually have a strong buy signal at the moment,” he said. “From a pure QI perspective. We want the macro model value to turn higher.”
As to what could turn the tide for gold, Roberts said that the model suggests there needs to be a shift in the trend in interest rates. Roberts noted that they had highlighted 16 factors that can influence the price of gold; however, the most significant factor driving the market remains inflation. Inflation accounts for more than 18% of gold’s fair value, according to research from QI.
Although inflation is at its highest level in 40 years, real yields are rising. At the same time, breakeven levels, the difference between nominal and real yields, are falling as recession fears increase.
“Breakevens are coming lower, while the market’s getting worried about a recession and falling inflation and until those factors turn around or just stabilize, then our model value isn’t going to stabilize,” he said.

Recession fears have grown in recent days as the market prepares for another extraordinary rate hike from Federal Reserve. Markets expect the U.S. central bank to raise the Federal Funds rate by another 75 basis points at the end of the month.
But it’s not just gold that has dropped below its fair value. Roberts said that silver could be a slightly more interesting asset to watch in the near term.
According to QI’s modeling, silver is about a half standard deviation below its fair value, more than gold but still not enough to trigger a buy signal. Roberts said he watches assets at least one standard deviation from fair value.
QI’s modeling sees silver prices about 7% below fair value. Silver has seen a much sharper drop compared to gold. The gold/silver ratio is currently at its highest level in two years at 90.58 points. September silver futures last traded at $19.155 an ounce, down 0.42% on the day.
What makes silver slightly more exciting compared to gold is that QI’s model shows that the metal’s maco-fundamentals appear to be bottoming and turning higher.
“It’s still early, and we wouldn’t get excited until the macro picture made a new high confirming a bottom, but silver is one asset to watch,” he said.
The asset that Quant Insights is watching closely is copper. The industrial metal has taken a significant bruising as recession fears have increased. Slower economic growth would lead to less demand for copper. Copper prices are trading roughly at a 1.5-year low below $3.50 a pound.
Roberts said that according to QI’s modeling, copper is four standard deviations away from fair value. He added that the copper market has only been this oversold four times in the last 14.5 years.
“If we’re not at the bottom, we’re probably quite close,” he said. Continue reading →

Editor’s Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today’s must-read news and expert opinions. Sign up here!
(Kitco News) – Fortuna Silver Mines (TSX: FVI) reported today that in Q2 2022, the company produced 62,171 ounces of gold (up 100% over Q2 2021) and 1,652,895 ounces of silver (down 13% over Q2 2021).
The company said it delivered a steady production performance in Q2 2022 with all mines on target to achieve annual guidance for silver and gold, adding that gold production increase of 100% year-over-year was achieved due to positive performance of its Lindero and Yaramoko mines.
Fortuna noted that silver production decrease was primarily driven by a 9% decline in head grade at the San Jose mine, which is in line with the mineral reserve average grade for the second quarter.
The company’s by-product base metal production amounted to 7.6 million pounds of lead (Q2 2021: 8.1 million pounds) and 10.9 million pounds of zinc (Q2 2021: 11.8 million pounds).
Importantly, Fortuna said it reiterates its annual production guidance range of 6.2 to 6.9 million ounces of silver and 244 to 280 thousand ounces of gold.
The company also pointed out that at the Séguéla gold project in Côte d’Ivoire, despite the challenges seen in the supply and logistics markets, construction activities are progressing on-time and on-budget with the overall project progress reported at 64% complete as of June 30th. Major equipment packages have started to arrive at site and first gold pour is projected for mid-2023.
Fortuna Silver Mines is a Canadian precious metals mining company with four operating mines in Argentina, Burkina Faso, Mexico and Peru, and a fifth mine under construction in Côte d’Ivoire. Continue reading →