Hawaii Six O - Gary Wagner
Gold continues to trade lower absorbing small gains in New York trading
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Gold in the spot and futures markets gave up all of the small gains after the New York session ended and is now trading lower on the day. Gold futures gained $2.60 and settled at $1636.80 in New York trading today. However, that modest gain was erased after the New York markets closed and Globex opened. As of 3:51 PM EDT gold futures basis, the most active December 2022 contract is currently fixed at $1631.40 which is a net decline of $2.80 or 0.17%.
Silver futures also gave up much of its gains that occurred by the close of trading in New York today. Silver basis the most active December contract gained $0.33 and closed at $18.68. Currently silver is trading at $18.50 which is a net gain of approximately $0.22 or 1.2%.
It seems as though there is a group of traders that look at any gains small or large in gold and silver as an opportunity to fade those gains by actively initiating short positions.
The only day that gold and silver closed positive on the day was Monday. These gains occurred after gold sold off last Friday closing at $1649.10 approximately seven dollars below Friday’s opening price. Gold opened at $1660 on Monday, traded to a high of $1674, and closed at approximately $1664.
The high and close achieved on Monday are currently the highest values that gold reached this week. Although gold traded to a higher low on Tuesday when compared to Monday’s low both Wednesday and today gold traded to a lower low than the previous day. Gold traded to the lowest low this week today at $1626.30, which is only $5 above the low for the year. In the last 12 trading days, nine of those days resulted in red candles which means that gold closed below its opening price on those days.
The recent bearish market sentiment in gold has been the direct result of market participants having genuine concern about upcoming rate hikes of 75 basis points at the final two FOMC meetings this year in November and December. Comments made by multiple Federal Reserve officials have underscored their intent and focus on lowering inflation by raising interest rates. This has led to higher yields in U.S. debt instruments across-the-board including 10-year Notes and 30-year Treasury bonds.
Yields have been steadily climbing to higher value and continue in trading today. The yield of the 10-year Note gained 2.4% today and is currently yielding 4.226%. Yields on 30-year bonds increased by 2.18% and are currently yielding 4.216%. There continues to be an inverted yield between 10-year Notes and 30-year Bonds with the 10-year Note having slightly higher yields than the longer-term debt instrument. This is an indication that investors and traders perceive current yield levels as higher than they will be years down the road.
Recent statements by James Bullard and Neel Kashkari both Federal Reserve Bank Presidents have confirmed that they are looking to get the benchmark interest rates closer to 4 ½% or 5%. As long as the Federal Reserve continues to raise its benchmark rate it is likely that gold will react negatively to higher interest rates rather than focusing on inflationary pressures which continue to be persistent.
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Wishing you as always good trading and good health,