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Extreme gold price swings to hit markets next week as metal tackles $2000 — analysts – Kitco NEWS

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(Kitco News) Gold price volatility is here to stay, according to analysts, who forecast even steeper price swings than the $100 daily moves seen this week.

Despite the overall bullish outlook for gold, wild price moves have kept investors busy trying to figure out their strategy while gold bounces between the lows and highs of $1,900 an ounce.

At the time of writing, gold was seeing a nice rally with December Comex gold futures trading at $1,979.80, up 2.44% on the day.

“We’ve had high volatility for the past few weeks and that is not going to change. A lot of things are still coming down the pipe — valuation of the equity market, comments by the Fed Chair on Thursday, elections in November. Volatility will be here at least through December, which will be extremely difficult to trade,” Kitco Metals global trading director Peter Hug said on Friday. “Any news bite that comes out could trigger a volatile move.”

Hug is bullish on gold next week, expecting prices to test the $2,000 an ounce level, an important trigger to watch. If gold can sustain its gains above that critical psychological level, more gains are likely in store. “The next time we get through the $2,000 an ounce level, it will be the next leg up for gold,” Hug noted.  

The big question is whether gold’s consolidation has run its course, TD Securities Commodity Strategist Daniel Ghali told Kitco News. “Gold continues to balance on the uptrend that has been prevailing since the pandemic,” Ghali said. “Traders watching the technical pattern. If prices manage to break out of it, [the bullish trend could prevail]”.

On the downside, Ghali is watching $1,910 and on the upside, he is looking at $1,975 an ounce.

How to handle volatility

Very thin trading next week is likely to cause very extreme price swings in the gold space, the analysts warned.

“A lot of traders are away and we are seeing thin markets. A lot of buying is algorithmic driven,” Phoenix Futures and Options LLC president Kevin Grady told Kitco News. “On Thursday, gold rallied $30 and then sold off $70. One hundred dollar swings are not typical for gold. A lot of people are on the sidelines. And next week, it will be even thinner. You are going to see exacerbated price swing as the algorithms take control.”

For investors, Hug recommends keeping emotions out of it and maintaining a gold position as part of a balanced portfolio. “This is not the time to panic,” he said.

For traders, Hug suggests taking a macro perspective on things since it is difficult to put in stops with such high price swings on a daily basis, he noted. “If you are a day trader, it is really difficult to trade the market because it is built up on both sides. Make sure you have the capital available to meet margin calls,” he stated.

Grady said that many investors are starting to choose gold-backed ETFs, like the GLD, versus the futures due to the high levels of volatility.

What does Powell’s message mean for gold?

There was some confusion in the gold market following Federal Reserve Chair Jerome Powell’s keynote address at the virtual Jackson Hole on Thursday.

Powell introduced a new approach to setting monetary policy, which lets inflation and employment run higher. The Fed will now seek inflation, which averages 2% over time, ensuring that interest rates remain low for years to come.

Yet, despite being great news for gold, the precious metal sold off $72 in just one hour during the speech.

“What the market wanted to see from Powell was a more concrete statement on what the Fed’s policy was in terms of inflation. During his speech, Powell first said that the Fed was going to use an average inflation model and let inflation run a little hotter until the economy would regenerate itself. That comment kicked off a rally. Then, five minutes later, Powell said that if inflation does run a little too hot, the central bank will take steps to bring it down,” said Hug. “That took the edge of that first comment.”

However, despite some confusion, the overall macro picture is a very positive one for gold, noted Hug. “The Fed is going to remain extremely accommodative at least through 2021 until the economy starts to regenerate. In that context, gold will be higher,” he said.

If anything, the outlook is even more bullish now, added Grady. “What Powell was saying is that the Fed is prepared to let the economy run hot for a while without raising rates for five years. This is very bullish for gold,” he said.

Data to watch

There are a number of fresh key data sets being released next week. For gold, the most volatile figure will likely be the U.S. employment data, scheduled for Friday.

After Powell’s speech, the focus will shift to the U.S. labor market, said LaSalle Futures Group senior market strategist Charlie Nedoss. “We have seen the U.S. economy create 9 million jobs in the last two months, but we lost 20 million jobs in March,” Nedoss said.

Weak employment numbers could drive gold higher because of expectations that the Fed will pump more liquidity into financial markets, Nedoss added.

The market is projecting for 1.5 million jobs to have been added in August.

“This would leave employment a net 11.4 million lower than in February,” said ING chief international economist James Knightley. “Unfortunately, we are a little more pessimistic … We are looking for a more modest payrolls growth figure of 900,000. This means we also see some upside for the unemployment rate, particularly with uncertainty over the Federal government unemployment benefits boost likely incentivizing some people to start looking for work more actively.” 

Other U.S. releases include Tuesday’s ISM manufacturing PMI, Wednesday’s ADP private-sector employment and factory orders, as well as Thursday’s jobless claims and ISM non-manufacturing PMI.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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