Back to the futures, gold and silver futures!

Precious metals traders flocked to gold and silver futures today as the metals showed a stellar response to changes in the Fed’s aggressive monetary policy. Market participants continue to react to President Jerome Powell’s speech at the Brookings Institution in Washington. Traders continue to focus on his remarks to slow the pace of upcoming rate hikes.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down… The time to moderate the pace of rate increases may come as soon as the meeting of December.”

As of 5:01 p.m. EST, the February 2023 most active Comex contract gold futures basis is set at $1817.40, after factoring in the largest one-day gain in two years of 57, $50 or 3.27%. Although today’s gold futures gains were a combination of dollar weakness and buyers actively initiating long positions, traders bidding the precious yellow metal on the upside were the overwhelming and predominant reason for the gain. from 3.27% today.

Currently, the dollar is trading considerably lower currently down 1.23 points or 1.17%. Considering gold gained 3.27%, dollar weakness accounted for about a third of February’s gold futures gains, which is quite different from spot markets.

Spot or physical gold gained $34.30, roughly 60% of the movement seen in gold futures. The noticeable difference in the gains of spot gold versus futures was that traders buying physical gold only accounted for $12.70 of the current gain of $34 plus, the remaining $21.60 being directly attributable to the weak dollar. It is according to KGX (Kitco Gold Index).

Given that gold futures gained 3.27%, this percentage gain was eclipsed by the remarkable 5.46% gain on silver. Currently, the most active March 2023 silver contract is up $1.19 and set at $22.97.

As I mentioned yesterday, the reaction of investors as a whole, their prayers have been answered, hearing that the Fed will begin to slow the pace of interest rate hikes. However, they seem to ignore the fact that the Federal Reserve plans to continue raising interest rates throughout 2023 and possibly 2024. President Powell made this clear in his speech yesterday saying: “Restoring price stability is likely to require policy to be held at a restrictive level for some time…History strongly cautions against easing policy prematurely. We will stay the course until the job is done.

What is clear is that the rally in gold futures from $1621 to $1817, a 10.78% gain since Nov 3 (less than a month) reflects a major change in sentiment market by investors. The hypothesis behind the rally which started on November 3 was confirmed yesterday; the Fed will slow the pace of future rate hikes.

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Wishing you as always good exchanges,

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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