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Gold and Silver Prices
Gold closed higher on Friday and is on track for its second quarterly rise as the dollar dropped following weaker-than-expected U.S. consumer spending data.
"'The dollar is pulling back a little bit,' said Josh Graves, senior commodities strategist at RJO Futures in Chicago. 'Personal spending has declined, so investors are looking to place money in more safe-haven assets, like gold.'
"U.S. consumer spending rebounded less than expected in January and incomes rose modestly in February, adding to concerns that slowing global growth was affecting the world's largest economy as well.
"The dollar edged lower against a basket of other currencies after the U.S. data, but pared losses as sterling fell after British Prime Minister Theresa May's Brexit deal was again voted down in parliament.
"Also propping up bullion were cautious signals from the U.S. Federal Reserve and the European Central Bank.
Gold ended the week down $21.40, closing at $1,292.00. Silver ended the week down $0.31, closing at $15.09.
Gold To Rally To $1,360 'Sooner-Than-Expected - TD Securities - Golubova
TD Securities sees its target price of $1,360 for gold in the next few months and even higher towards next year.
"Gold's move up to $1,323 could mean that a rally towards $1,360 is coming 'sooner-than-expected,' said TD Securities, citing a possible rate cut by the Federal Reserve as a trigger for the yellow metal.
"'Gold set [to] rally towards our $1,360/oz target sooner-than-expected,' TD Securities commodity strategists wrote in a note on Monday. 'Given that the market is increasingly pricing in a U.S. rate cut this year, the US dollar is on a weak footing and considering that equities are generally more worried about growth, gold could well move into a higher trading range sooner than expected.'
"TD Securities sees gold prices rising to $1,360 within three months and then moving towards $1,400 next year.
"'We suspect that current prices will prompt aggressive CTA buying along with additional spec length,' TD's strategists stated.
"The latest boost to gold prices came from the drop in rates across the yield curve, noted TD Securities.
"'Gold jumped to its highest in some three-weeks as the Fed adjusted the dot plots to signal no more interest rate hikes this year, global growth concerns grew, the USD dollar migrated lower and the yield curve inverted, adding upside risk to gold into $1,360/oz territory,' the strategists pointed out.
"Going forward, gold investors should pay close attention to global macro releases that focus on inflation and growth, the note added.
"A global easing cycle ... could risk triggering competitive devaluations. Both PCE inflation and the series of growth prints will be crucial towards gathering additional insights as to whether the market's pricing of cuts is warranted," the commodity strategists wrote.
"'Some safe-haven buying amid wobbly world stock markets, combined with chart-based buying interest, are lifting the two precious metals markets,' wrote Kitco's senior technical analyst Jim Wyckoff." ("Gold To Rally To $1,360 'Sooner-Than-Expected'- TD Securities," Anna Golubova, Kitco News, 03/25/19.)
Gold scores highest finish in a month as global market jitters persist - Saefong
An analyst sees another $10-20 added to gold easily in the coming sessions.
"Haven gold pushed higher again Monday to tally its best finish in about a month, as financial markets kept attention fixed on global growth fears and as a recessionary alarm persisted in the bond market.
"Bonds rose on Monday after Friday's action marked the first U.S. Treasury yield curve inversion since 2007, feeding concerns around this oft-referenced recession signal. As such, U.S. stocks moved lower in Monday dealings as gold futures settled.
"Gold... which marked its third weekly rise in a row, as investors sought the relative safety of precious metals away from risk-on markets, including stocks.
"Gold continued to benefit Monday 'from investors going into safe haven assets,' said Peter Spina, president and chief executive officer of GoldSeek.com. 'Global economic data, inversions of yield curves and now over $10 trillion in debt globally yielding negative rates are some of the strong influencers, including the continued market selloff which is reviving fears among investors who are seeking safety over risk.'
"The 10-year U.S. government bond yield TMUBMUSD10Y, +0.58% fell to 2.453% Friday, trading beneath the yield on the 3-month T-bill and inverting that important part of the yield curve for the first time since 2007. Yields fall as bond prices rise. The 10-year note yield was down 4.43 basis points at 2.407% Monday
"Spina said 'gold can easily add another $10-20 in the coming sessions before we start to move into technically challenging resistance...'
"Meanwhile, the first market reaction to a long-awaited report by special counsel Robert Mueller's investigation came in Asia trading, where stocks initially gained. The report, released on Sunday, didn't find evidence that the Trump campaign 'conspired or coordinated' with Russia to influence the 2016 presidential election, according to Attorney General William Barr. Mueller also investigated whether Trump obstructed justice but didn't come to a definitive answer.
"Instead, investors were refocused on global recession fears sparked Friday by a round of weak March purchasing-managers-index readings in the eurozone and the U.S. that pointed to a further slowdown in activity.
"Weaker economic data Friday came after the Federal Reserve earlier that week signaled that most policy makers expect to deliver no rate increases in 2019 versus a previous indication of two hikes this year. The central bank also downgraded its growth forecast as it pledged to remain patient, following through on a January pivot that saw it abruptly put its policy of gradual monetary policy tightening on pause.
"Speaking in Hong Kong on Monday, Chicago Fed President Charles Evans said the U.S. economy is showing signs of slowing..." ("Gold scores highest finish in a month as global jitters persist," Myra P. Saefong, Market Watch, 03/25/19.)
Gold Price Forecast: Why it is rising on US recession fears and the big levels to watch - Elam
Gold is considered a safe-haven in times of uncertainty and is the most recent booster related to fears of a recession in the U.S.
"... The precious metal continues shining into the new week after recovering beforehand.
Gold rising on recession risk
"The most recent driver of Gold is related to fears about a US recession. These concerns stem from the temporary inversion of the yield curve. On Friday, the US 3-month yield dropped below the 10-year return for the first time since 2007. In the past, such inversions marked an upcoming recession.
"The plunge in German manufacturing PMI was fuel to the fire on the dovish Fed decision. While the US central bank supports markets, its reluctance to raise rates caused markets to think that things are set to get worse.
"Will this time be different? Perhaps. Central banks are holding an unprecedented amount of bonds and pushing yields lower. The signal may be false. Nevertheless, if markets believe that the inversion represents a recession, it may become a self-fulfilling prophecy.
"Gold is seen as a safe-haven or a hedge against worsening conditions. Gold does not have any yield, but if yields of bonds are falling, gold has an advantage in addition to the rising price.
"$1,333 held the yellow metal down in late February and served as a stepping stone on the way down... $1,346 was the peak on February 20th and the highest level since April 2018. $1,356 was a double top in April and March last year. It is followed by another potent cap which was a triple-top: $1,365 was a peak in April and in January last year as well as in August of 2016.
"Even higher, the July 2016 high of $1,375 is the next level to watch. The next peak is from February 2014, over five years ago. That was $1,392... $1,429 dates back to August 2013 and $1,487 to April that year.
"Support is found at the round number of $1,300, at $1.281, and at $1,275. All have been stepping stones on the way up." ("Gold Price Forecast: Why it is rising on US recession fears and the big levels to watch," Yohay Elam, FXStreet, 03/26/19.)
Bond market says not only is a recession coming, but the Fed will cut interest rates to stop it - Domm
Recession warnings and fears the Fed will need to have one or more rate cuts to stop the economy from rolling over are being ignored by stocks while traders say the bond market may be overreacting.
"The bond market doubled down on scary warnings Monday, signaling both a possible recession is looming and that the Fed could have to cut interest rates this year to stop it.
"'People are starting to get fearful,' said Andrew Brenner of National Alliance. 'It won't last for long, but they're getting fearful about a recession. You had a Fed that changed course 180 degrees and then added to it last week. That caught the market off guard.'
"The disconnect between stocks and bonds was fairly dramatic Monday, after the bond market flashed a recession warning Friday.
he Dow traded as much as 100 points on both sides of unchanged Monday, but the bond market reflected a flight to safety trade, with yields falling across the curve from the shortest duration securities to the longest. The Dow ended up 16 at 25,516, while the S&P 500 fell 2 points, to 2,798. The move was also global, with the German 10-year bund yield falling to a negative 0.03 percent.
"At the same time, there was plenty of action in fed funds futures, where traders were betting on at least one 25 basis point cut from the Federal Reserve this year and more than two by next year. That's a big change from late last year, when the market was still expecting interest rate hikes and the Fed was forecasting three.
"On Friday, markets were spooked when the yield curve inverted, a reliable recession signal though usually not an immediate one. That means the rate on a lower duration instrument rose above a longer duration security's yield. In this case, it was the yield on the 3-month bill, at 2.44 percent Monday, moving above the 10-year yield, which sank as low as 2.38 percent, a more than 2-year low. Yields move opposite price.
"In another sign of angst, traders were also watching the 10-year yield Monday as it slid below 2.40 percent, about where the fed funds rate is. The 2-year, at 2.24 percent, was well below that level.
"'The 10-year is inverted versus the current fed funds. It should signal expectations that rates are going to be lower in the future, which would be consistent with notable risk of a recession,' said Jon Hill, U.S. fixed income strategist at BMO. 'One of the fascinating things is the stock market is taking this in stride. The Fed is trying to extend this cycle as long as it can. Whether it will be enough is difficult to say.'
"Hill said, however, he believes some of the moves in the market Monday were more about technical signals and short squeezes than real fear about recession. The Fed changed the tone in markets significantly Wednesday, when it was even more dovish than expected and cut its rate forecast to just one for this year from two. Chicago Fed President Charles Evans also added to the move when he said on Monday that the Fed could hold or even loosen policy.
"The Fed Wednesday released a new forecast for no rate hikes this year from two previously, but the market had been already been pricing in six basis points of an ease for this year. After the meeting, it moved to price in 19 additional basis points, or at least one 25 basis point cut this year, according to Hill.
"'As recession signals begin to flash and recession probabilities increase, I would expect market participants and people who deploy capital will become more cautious and there's a risk that it's a self-fulfilling prophecy,' Cabana said.
"Brenner said the 10-year yield is getting ahead of itself but for now it could still go lower. He said the market was bracing for about $350 billion in new U.S. debt this week in both notes and bills. 'We have the cheapest rates in a long time. You're in the last week of a quarter plus it's Japanese year end. All the things that are affecting it aren't going to be affecting it next week,' said Brenner." ("Bond market says not only is a recession coming, but the Fed will cut interest rates to stop it," Patti Domm, CNBC, 03/25/19.)