Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
In midday U.S. trading on Tuesday, gold prices modestly increased following data showing that U.S. producer prices in July rose less than expected, indicating continuing easing of inflation and strengthening expectations for rate cuts. However, silver prices fell. Precious metals traders are now closely watching U.S. economic data scheduled for Wednesday and Thursday.
December gold futures rose by $3.90 to $2,507.90, while September silver futures dropped by $0.268 to $27.745.
According to data released by the U.S. Department of Labor’s Bureau of Labor Statistics on Tuesday, the Producer Price Index (PPI) for final demand rose 0.1% month-on-month in July, slightly below economists’ forecasts of a 0.2% increase. It was up 2.2% year-on-year. The “core” PPI, which excludes food and energy prices, remained unchanged month-on-month, falling short of the market’s expected 0.2% increase. PPI is considered a leading indicator of inflation.
On Wednesday, the U.S. will release the July Consumer Price Index (CPI).
Market analysts have noted that decreases in PPI and CPI could prompt the Federal Reserve to begin cutting interest rates starting in September, which would support a long-term uptrend in gold prices. According to the CME’s FedWatch tool, traders now see about a 54% chance of a 50 basis point rate cut by the Fed in September. Gold tends to be more attractive in a low interest rate environment.
Meanwhile, gold is considered a hedge against geopolitical and economic uncertainties. The U.S. government has again warned of an imminent attack by Iran or its proxy groups on Israel, potentially occurring this week. In addition, Ukrainian forces have reportedly established a foothold within Russian territory. These geopolitical tensions have driven some safe-haven investments into the gold market.
TD Securities noted in a report that gold is currently seen as a hot trade from all perspectives, with Wall Street consistently bullish.
According to ING commodity strategist Ewa Manthey, gold prices are expected to peak in the fourth quarter as investors focus on the Fed’s rate cut moves, while ETF inflows and central bank purchases under the backdrop of geopolitical risks will continue to support gold prices.
Technically, December gold futures bulls have a clear short-term technical advantage. The bulls’ next upside target is to reach the resistance level at $2,537.70, while the bears are targeting a support level at $2,350.00. In contrast, September silver futures bears hold the short-term advantage, indicated by a 2.5-month-long downtrend on the daily chart. The target levels for silver bulls and bears are $29.355 and $26.00, respectively.
