(Kitco News) – Gold prices are struggling due to U.S. yields and have potential to fall further, but a recovery for the metal is coming, says ABN Amro.

“The rally in gold, silver and platinum prices came to a halt on 8 September mainly because U.S. real yields bottomed out, which has provided support to the U.S. dollar,” said Georgette Boele, senior precious-metals analyst for ABN Amro, in a report Thursday.

“In the coming days and weeks, we expect the U.S. dollar to continue to recover, which will probably weigh on gold, silver and platinum prices….Gold prices could decline towards $1,250 per ounce, which will be close to the 200-day moving average.”

At the session low, Comex December gold had fallen $82 an ounce from the Sept. 8 high of $1,362.40. During that time frame, the yield on 10-year U.S. Treasury notes rose from a Sept. 8 low of 2.037% to a high so far Thursday of 2.344%.

The metals have had a rough week, with gold and silver recently hitting six-week lows. December gold futures were last seen at $1,285.50 an ounce, down $2.30 on the day. Meanwhile, December silver was last trading down 4.7 cents an ounce at $16.78.

Although a drop below Boele’s $1,250-an-ounce call would put this year’s gold rally into question, she remains optimistic.

“We expect gold prices to bottom out close to $1,250 per ounce and to move higher again,” she said. “This is because we expect U.S. real yields to edge lower. Moreover, the U.S. dollar recovery is temporary in nature in our view and we expect the U.S. dollar to weaken again at the end of the year and next year.”

ABN Amro is calling for gold to close the year at around $1,300 an ounce and to edge up to $1,450 by the end of 2018.

(Kitco News) – The World Gold Council Thursday proposed a spot gold exchange for India and offered to play a lead role in establishing a committee to provide guidance.

The country is the world’s second-largest gold market behind China, with annual demand of between 800 and 900 tonnes, the WGC said. Still, the Indian market faces challenges that could be diminished with an exchange, officials said.

“These challenges include lack of quality assurance, weak price transparency and fragmented liquidity and regulatory issues,” the WGC said. “There is a pressing need to reform the gold-trading market in India.”

The Indian government previously raised the idea of a national exchange two years ago, according to news reports.

The WGC listed several ways an exchange would help transform the Indian market, starting with standardization of bullion by setting delivery standards, thereby improving “trust” in gold. An exchange would mean increased price transparency, and could even lead to an “India reference” price that strengthens the country’s position in the global market, the WGC said. An exchange could also better organize what is an otherwise “fragmented” market in India, the WGC said.

“The spot exchange will enable players across the value chain to source physical gold without going through several layers of intermediaries,” the WGC said. “The exchange will enable financial institutions to launch gold-backed products more effectively, thereby providing a strong impetus to government initiatives for monetization of household gold.”

Development of an exchange would require close coordination among all of the participants in the market, the WGC said. The first step includes securing a commitment from key market participants.

Given the magnitude of work that needs to be done in setting up the exchange, the World Gold Council said it is willing to play a key role in this entire process. Officials added that the WGC played a similar role in the establishment of the Shanghai Gold Exchange and a kilobar contract in Singapore.

India has several commodity exchanges, although they are futures exchanges primarily used to hedge against gold-price risk and to take proprietary positions, the WGC said. A spot exchange would focus on price discovery and provide physical deliveries.

An exchange would need to disseminate prices with the best possible sell orders in order to minimize bid-ask spreads, the WGC said. A small number of specified contracts should be established, as well as delivery locations. Vaults would be established for safe storage. A “clearly defined regulatory architecture” would also be required, the WGC added.

“While bullion market participants will benefit directly, scrap dealers, gold doré importers and end consumers will receive indirect benefits,” the WGC said. “However, the exchange may also create some short-term challenges for those participants who currently do not adhere to delivery and compliance standards. “

(Kitco News) – Some bargain buyers surfaced to buy the dip in gold prices in late Trading Thursday, to lift the metal just above steady on the day. Trading was choppy and on both sides of unchanged in the New York session. Gold and silver prices dropped to six-week lows in earlier trading Thursday. A weaker U.S. dollar index today also encouraged buying interest in the precious metals markets. December Comex gold was last up $1.60 an ounce at $1,289.40. December Comex silver prices were last up $0.038 at $16.865 an ounce.

Better risk appetite in the marketplace this week, as well as a rallying U.S. dollar index the past two weeks, have been bearish elements for the gold and silver markets that have kept buyers scarce.

The U.S. dollar index was slightly lower Thursday but hit another five-week high overnight. A bullish head-and-shoulders bottom reversal pattern has formed on the daily bar chart for the USDX, which is a technical clue that a market bottom is in place. Meantime, the Euro currency hit another five-week low against the U.S. dollar overnight before rebounding at bit in New York trading Thursday. There are chart clues the Euro has put in a near-term market top.

The other key outside market on Thursday saw Nymex crude oil futures lower on profit taking after hitting a five-month high overnight. The oil bulls still have the near-term technical advantage. However, there are stiff chart resistance levels just overhead in the crude oil market.

Live 24 hours gold chart [Kitco Inc.]

20170920gold

Technically, December gold futures prices closed nearer the session high after hitting a six-week low early on today. Bears have the slight near-term technical advantage. A steep three-week-old downtrend is in place on the daily bar chart. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,320.00. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at $1,270.00. First resistance is seen at $1,300.00 and then at $1,307.00. First support is seen at today’s low of $1,280.40 and then at $1,275.00. Wyckoff’s Market Rating: 4.5

Live 24 hours silver chart [ Kitco Inc. ]

20170929silver

December silver futures prices closed nearer the session high and hit a six-week low early on today. The silver bears have the slight overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $17.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at $17.00 and then at this week’s high of $17.295. Next support is seen at today’s low of $16.705 and then at $16.645. Wyckoff’s Market Rating: 4.5.

December N.Y. copper closed up 475 points at 297.70 cents today. Prices closed nearer the session high today. The copper bulls have the overall near-term technical advantage. Copper bulls’ next upside price objective is pushing and closing prices above solid technical resistance at the September high of 317.85 cents. The next downside price objective for the bears is closing prices below solid technical support at 280.00 cents. First resistance is seen at today’s high of 299.00 cents and then at 300.00 cents. First support is seen at 295.00 cents and then at today’s low of 290.50 cents. Wyckoff’s Market Rating: 6.0.

(Kitco News) – After taking a hit and plunging below $1,300 an ounce this week, gold is looking to remain under pressure, as the more aggressive U.S. Federal Reserve holds the yellow metal back, according to analysts.

Prices are likely to “gravitate lower,” Bart Melek, head of global strategy at TD Securities told Kitco News. “Looking at mid-$1,280 on the downside and strong resistance right around $1,315.”

The precious metal gave way to a more hawkish Fed this week, said Christopher Louney, commodity strategist at RBC Capital Markets, who was expecting to see a downturn in gold ever since it rallied up to $1,350.

“The Fed said it remains on track for another rate hike before year-end. What we are looking for is some stability in gold now,” Louney said.

On Wednesday, the Federal Open Market Committee kept its key interest rate unchanged, while announcing that it still plans to raise rates at least one more time this year. The central bank also said it will begin shrinking its $4.5-trillion balance sheet in October.

On Friday, gold managed to recover somewhat from its post-FOMC drop, rising on additional safe-haven demand triggered by new North Korea threats of testing a hydrogen bomb over the Pacific Ocean. The country’s leader Kim Jong-Un also referred to President Donald Trump as a “mentally deranged U.S. dotard.” December Comex gold was last seen trading at $1,299.60, up 0.37% on the day.

North Korea merits attention next week, said Louney. “Increases in geopolitical risks could lead to spikes in gold prices. But, macro forecast points to gold being below $1,300.”

Louney pointed out that gold has been “shrugging off a lot of geopolitical worries” lately, as increased risks are now the “new normal.”

“The bar that you have to clear to get large spikes is pretty heavy. In the context of geopolitical uncertainty, you need a pretty significant event to get a sustained tick higher in gold prices,” he said.

However, some analysts see North Korea playing a bigger role next week, which could push prices higher.

“Looking for a break above $1,300, as North Korea is driving the safe-haven trade. The issue did go away for a bit, but now it came back. Support is at $1,276 and resistance is at $1,326-$1,330,” said Jonathan Butler, an analyst at Mitsubishi.

Others project that the U.S. dollar index will decline next week and boost gold. “The dollar index started a new downtrend and this will help buoy the metal in the long run. Not to mention ongoing geopolitical fears,” said Bill Baruch, principal at Blue Line Futures.

The dollar rally following the Fed announcement appears to be over, added Colin Cieszynski, chief market strategist at CMC Markets. “Technically, gold has bounced up off of its 50-day average and overbought conditions have eased. So things could be looking up for gold.”

But, a lot of technical damage has already been done this week, Cieszynski pointed out. “Gold needs to retake $1,300 to signal the end of the current selloff which it has not been able to do yet. Gold could consolidate in the $1,280-$1,300 range in the coming week, so I am neutral.”

What To Watch

It will be wise to pay close attention to any North Korea developments next week, said Melek. “Any escalation in rhetoric or missile tests are potential for the upside.”

From a macro data perspective, economists pointed to the final U.S. Q2 GDP release and Personal Consumption Expenditures (PCE) index, scheduled for publication on Thursday and Friday, respectively.

“Significant upgrade to the final GDP could drive gold lower. There is also the Fed’s favorite inflation measure. If we see a pickup in inflation, a December rate hike becomes more certain and that would be a downside for gold,” Melek explained.

Sunday’s election in Germany is also an important event to keep an eye on, even though no surprises are expected. German Chancellor Angela Merkel is the favorite to win against Social Democratic chancellor candidate Martin Schulz. If Merkel wins, it will be her fourth term in power.

“From all accounts, it looks like Merkel will win again. The big surprise would be if the AfD, the far-right Alternative for Germany party, got a strong showing. The focus is not on what happens between Merkel and Schulz, but on the AfD. Also, if they do worse than 8%, that could have an impact as well,” Cieszynski said.

On top of that, there are a number of key Fed speakers lined up for next week, including Fed Chair Janet Yellen’s address on Tuesday.

“Yellen’s comments and the U.S. dollar are likely to have the most influence on gold next week,” said Cieszynski.

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Last week, I mentioned the possibility of strong support levels in the gold sector, which were previously resistance zones, being tested in the wake of the Federal Open Market Committee (FOMC) meeting speech on September 20th. After the hawkish toned language by Janet Yellen had been set to be sold by computer based algorithm trades, the gold price made a bee-line towards support at $1300, while the GDX sank towards the support level of $23.

The U.S. central bank said that it would begin trimming its $4.5-trillion portfolio of assets next month and that it was sticking with plans to hike interest rates this year despite the recent skepticism in the market. The Fed also suggested they will be raising rates three additional times in 2018. In response, futures traders raised the odds of a December rate hike to 72% from 52% earlier in the day.

As I type this missive, gold is close to testing strong support at $1,283, which is the 50% Fibonacci retracement of the entire July through early September rally. If gold fails to break down further, it indicates that 2016 highs will soon be broken on the way to higher targets in 2018.

The mining sector, when looking at the GDX, failed to break out above strong resistance at the $25-$26 level for the third time this year, which has continued to try the patience of miner investors. In my view, this failed attempt of the major miner ETF to finally break out of the now 14-month consolidation is just building a stronger accumulative base to go much higher in the very near future.

I just returned from the Precious Metal Summit in Beaver Creek, Colorado which is attended by the brightest minds in the junior mining space. The mood was very upbeat and the attendance was capped at 1,000 this year, which sold out very quickly. Last year, with the sector still buzzing over a huge move in the miners of 179% in just six months, the attendance was only 750.

On the first day of the conference, the gold sector took a huge hit but you would not know it judging by the mood at the show. While the global miners continue to strategically invest in quality juniors, these sector professionals understand how to take advantage of the early stage cycle opportunities being presented to them in this new precious metal miner bull. Major mining companies need to replace their rapidly depreciating reserves and this has very little to do with the price of gold.

As I mentioned in my weekly column back in May, simply follow the money when researching junior mining companies. No matter how the overall sector is trading, firms with quality deposits will continue to bifurcate from the mining space. This entails anticipating the companies which the global miners may be interested in either taking a position in, or taking over in the future, as well as watching for a good entry on a company which a major has already taken a sizable position.

This is a very appropriate time to begin this approach, while the sector is mired in what has now become a 14-month consolidation period. However, a generous amount of research and due diligence is highly recommended before purchasing a junior miner. If you require assistance in doing so, please stop by my website and check out the subscription service at http://juniorminerjunky.com/.