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Both Gold and Silver Find Their Groove

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Both gold and silver are trading higher today, with both precious metals showing strong and respectable gains on the day. Silver is continuing its remarkable breakout gaining over 2% in trading today. Gold has closed at the highest trading point this year, and in fact the highest trading point over the last six years, gaining 1.16% in trading today.

As of 4:50 PM EDT gold futures basis the most active August contract is currently trading up $16.40 and fixed at $1427.60. Silver futures have broken above $16 per ounce after factoring in today’s $0.32 gain, and is currently fixed at $16.005. Today’s gains were supported slightly by the tailwinds of a weaker U.S. dollar. Currently the U.S. dollar index is at 96.855, a net decline of 0.19% on the day.

Solid economic data yesterday put pressure on gold pricing while being highly supportive of the industrial component of silver. Today economic data was highly supportive of both gold and silver with the release of the Federal Reserve’s ‘Beige Book’ which in essence reported that the economy is growing at a “modest” pace.

This report by the Federal Reserve is a definitely highly weighted by Fed members in terms of their economic forecasts, and as such today’s report continues to be highly supportive of a series of rate cuts that should begin at the end of this month when the FOMC meeting ends on July 31st. The question that market participants and traders are pondering is the extent of the rate cut that will be announced by the Fed in just a few weeks.

According to the CME’s FedWatch tool there is a 100% probability that there will be a rate cut announced at the next FOMC meeting. It indicates that there is a 61% probability that the rate cut will be 50 basis points (1/2%), and a 39% probability that the rate cut announced will be 25 basis points (1/4%). In other words, according to this tool it is not if there will be a rate cut(s) but how much the Fed will cut interest rates.

There is no doubt that traders and market participants are beginning to take a much closer look at gold and silver pricing. In an interesting LinkedIn post on Wednesday which was reported by Neils Christiansen, Editor of Kitco News, billionaire investor Ray Dalio warned that the global economy is on the cusp of a paradigm shift but investors are underweight assets like gold to protect against the growing risks in the marketplace. This post went on to say that gold will continue to shine as loose central bank monetary policies and rising global debt devalue currencies around the world.

This post certainly confirms our current belief that gold will continue to gain value throughout the year with our current target at $1500 per ounce.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer