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Gold Consolidates After Five Days Of Solid Gains

Today’s nominal declines resulted from a combination of minor dollar strength, an uptick in yields on the 10-year U.S. Treasury notes, and market participants bidding both precious metals lower.

As of 5:15 PM EST, gold futures basis, the most active June 2021 Comex contract gave up $4.50 (-0.26%) and is currently fixed at $1738.50. Silver futures basis, the most active May 2021 Comex contract declined by $0.027 (-0.11%) and is presently fixed at $25.20.

According to the Kitco Gold Index (KGX), spot or forex gold is currently fixed at $1737.60 after factoring in today’s decline of $6.00. On closer inspection, $3.90 of that decline is directly attributable to sellers, with the remaining decrease of $2.10 a result of nominal dollar strength. Currently, the U.S. dollar index is fixed at 92.41 after gaining 0.062 points or +0.07%.

The minutes from last month’s FOMC meeting were released today. They indicated that Federal Reserve members unanimously recommended leaving the Fed funds rate between zero and 1/4 %. This is consistent with the Fed’s mandate to leave interest rates where they are at least throughout 2021 and very likely until 2022 or 2023.

The minutes from the March FOMC meeting began by stating, “Rates implied by interest rate futures maturing over the next several years rose notably over the intermeeting period, reportedly reflecting a reassessment by market participants of the expected path of the target range for the federal funds rate. Since the January meeting, the date of the first increase in the target range for the federal funds rate implied by a straight read of market pricing moved notably earlier to the first quarter of 2023, and the implied target rate at the end of 2023 rose around 50 basis points.”

While there are strong indications that, in many ways the economy in the United States is beginning to rebound and strengthen as news to the costs incurred by the United States government recently released has been alarming.

According to The Hill, “The federal deficit roared to $736 billion in the first four months of the 2021 fiscal year.” The Hill forecasts that are national debt for 2021 is on track to reach 2.3 trillion resulting in White House advisors to say that the U.S. economic outlook is in a ‘really grave situation’.

To put that in perspective the current forecast revealed through states that, “Government Debt to GDP in the United States is expected to reach 125.00 percent by the end of 2021, according to Trading Economics global macro models and analysts’ expectations.”

While the financial equities markets continued to score sizable gains and hit new record highs, it comes on the back of growing national debt. Our national debt in the United States is now the largest recorded debt in history. The economic fallout that could surface from this mounting debt will continue to support higher gold prices vis-à-vis a falling U.S. dollar.

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Wishing you, as always, good trading and good health,

Gary Wagner


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