· Gold and silver prices are higher in midday U.S. trading Tuesday. The bulls are still enjoying the solid technical advantage, which suggests price action will remain sideways to higher in the near term. The precious metals bulls are also expecting more good news to come their way from the Federal Reserve on Wednesday. August gold futures were last up $8.40 an ounce at 1,428.80. September Comex silver prices were last up $0.125 at $16.565 an ounce.
· The main economic event of the week began on Tuesday morning when the Federal Reserve’s Open Market Committee (FOMC) gathered to determine monetary policy. The Fed is expected to lower interest rates at the conclusion of the meeting Wednesday afternoon. The precious metals bulls will be sorely disappointed if the Fed does not make a U.S. rate cut. Most market watchers think a 0.25% interest rate reduction is in the cards, but the metals would likely get a bigger boost if the Fed did a less-likely 0.5% rate cut.
· Then on Friday the U.S. employment situation report for July is out. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.
· The World Gold Council reported emerging central banks are purchasing gold at a faster pace this summer. Lower government bond yields are attracting more buying interest in the yellow metal.
Also in focus this week is U.S.-China trade talks that have resumed at a high level. U.S. Treasury Secretary Mnuchin and U.S. Trade Representative Lighthizer are in Shanghai for discussions that began today. Expectations are low key for any significant breakthroughs.
· Gold is holding strong.
The yellow metal is on pace for its third month of gains and sitting at six-year highs as investors hold their breath ahead of the Federal Reserve’s pivotal meeting on Wednesday, in which the central bank’s leaders will decide whether to cut longer-term interest rates.
Regardless of the Fed’s decision, gold is set to surge either way, according to two longtime traders.
Whether the Fed succumbs to market expectations and cuts, or stays put and maintains its pledge of patience, “I look at gold as higher in both scenarios,” Anthony Grisanti, founder and president of GRZ Energy, said Tuesday on CNBC’s “Futures Now.”
If it cuts, Grisanti expects gold — which was trading around the $1,430 level on Tuesday — to slide to its 21-day moving average at $1,414.70.
“But if the Fed does nothing, you could get a surprise if the equities markets sell off and the buyers come into gold for protection,” the veteran futures trader said.
“Hedge funds have added about 60,000 contracts over the last five weeks in gold, so they’re getting long at a terrific pace right now in gold,” he said. “Say the Fed doesn’t do anything tomorrow, as I expect, and you have a big sell-off in equities, which I expect — then I think people ... are going to look at gold and say, ‘Hey, maybe we need to own this for protection.’”
· With things shaping up nicely for gold, Scott Nations, a historic gold bear and the president and chief investment officer of NationsShares, finally ceded to the bulls.
“People who have been watching the show for a long time are not going to believe their ears, but I want to buy the December contract at [$]1,440. My target to the upside’s going to be [$]1,475 ... with a stop that’s going to be [$]1,420,” Nations said in the same “Futures Now” segment.
· “The big question is what the tone of the Fed will be tomorrow. Interest rates are overwhelmingly likely to be cut. It’s just a question of by how much,” said Mitsubishi analyst Jonathan Butler.
“Gold is still at 6-year highs. Although it has been close to $1,450 recently, it seems to have found a level around $1,425.”
Reference: CNBC, Kitco
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