Gold Building A Firm Base Above $1900, While Silver Struggles

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Gold spent last week trading between $1,912 and $1,949 per ounce, as it builds a great base for the next leg higher above $1,900 per ounce. Last Thursday, Gold reached a six-month high of $1,949.80 per ounce on excellent trading volume. Gold closed on Friday at $1,929.40, up $1.20 for the week.

During last week, the U.S. Commerce Department reported that inflation is dropping as consumer spending is dropping in December. In December, personal consumption expenditures (excluding food and energy) increased only 4.4%, down from November 4.7%. This is the slowest annual rate jump since October 2021. Data from the Bureau of Labor Statistics showed last Thursday the U.S. economy expanded at a 2.9% annualized pace in the fourth quarter, even amid high inflation. Economists had forecast 2.6% growth. The pace was slower than the 3.2% in the prior quarter. Based on these numbers, many market analysts and economists believe that the Fed is less likely to raise interest rates in February.

I am seeing a slowdown in physical demand for many of the very popular physical investment Gold coins. Therefore, premiums have been dropping, nearing pre-covid levels. These lower premiums represent an excellent value at the current price level. Demand will pick up as Gold makes headlines after breaking above $2,000 per ounce.

Today: Gold is trading in a small range below $1,930 ahead of the FOMC meeting that will begin on Tuesday.

Silver initially broke above $24 per ounce on the current rally in December, when Gold was trading at $1,818 per ounce. Gold has rallied over $100, while Silver continues to trade between $23 and $24.50 per ounce. Silver’s price activity has been disappointing in January, but considering the massive rally from $18 in October to over $24 in December, it could be an extended base building period. When Gold moves above $2,000, I would be surprised not to see Silver reach $26 per ounce. On Friday, Silver closed at $23.55, down $0.30 for the week.

Today: Along with Gold, Silver has moved in anticipation of the meeting and is trading below $24.