Sharp price declines in gold, silver amid firmer USDX, rising bond yields
(Kitco News) - Gold and silver futures prices are sharply lower and near their session lows in early U.S. trading Wednesday. Rising government bond yields and a rebound in the U.S. dollar index at mid-week are negative outside forces working against the precious metals markets. Also, buying interest in the safe-haven metals has been limited recently by rallying stock markets and a rebound in the U.S. dollar index. And then there are the shorter-term, chart-based futures traders who are piling on because of the more bearish near-term technical postures in gold and silver. April gold futures were last down $24.10 at $1,710.00 and May Comex silver was last down $0.649 at $26.225 an ounce.
The U.S. data point of the day is the just-released ADP national employment report for February, which came it a up 117,000, which was a big downside miss from the expected rise of 225,000 jobs, and compares to a 174,000 gain in January. The metals markets sold off further following the data, even though it should have been supportive to prices. This report is a precursor to Friday morning’s employment situation report from the U.S. Labor Department—arguably the most important U.S. economic report of the month.
Global stock markets were mostly up overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Marketplace attitudes are upbeat at mid-week after President Biden said on Tuesday all Americans wanting a Covid vaccine should be able to get one by the end of May. Also, the U.S. government is getting closer to rolling out its newest pandemic assistance package that totals $1.9 trillion. “We can see light at the end of the tunnel of the pandemic,” said one market analyst. The safe-haven metals are getting no support from the above notions.
In overnight news, the Euro zone services purchasing managers index (PMI) in February came in at 45.7 compared to 45.4 in January. A reading below 50.0 suggests contraction in the sector.
Traders and investors are still keeping one eye on government bond yields, which have been generally rising recently, and which have made stock markets a bit wobbly at times. The U.S. Treasury 10-year note is presently trading around 1.446% for its yield. Many veteran market watchers believe U.S. Treasury yields will continue to climb in the coming months.
The key “outside markets” today see Nymex crude oil futures prices higher and trading around $61.85 a barrel. There is an OPEC meeting on Thursday that the marketplace will closely monitor. It could be that with oil prices above $60 a barrel that the cartel opens up its oil spigots some more, after curbing production in recent months to prop up prices. The U.S. dollar index is a bit firmer early today.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services purchasing managers index (PMI), the ISM report on business services, the global services PMI, the Federal Reserve’s beige book and the weekly DOE liquid energy stocks report.
Technically, the April gold futures bears have the solid overall near-term technical advantage amid a two-month-old price downtrend in place on the daily chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at this week’s high of $1,757.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at $1,725.00 and then at today’s high of $1,739.10. First support is seen at this week’s low of $1,704.60 and then at $1,700.00. Wyckoff's Market Rating: 2.5
May silver futures bulls have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week’s high of $28.47 an ounce. The next downside price objective for the bears is closing prices below solid support at $25.00. First resistance is seen at the overnight high of $26.915 and then at this week’s high of $27.175. Next support is seen at $26.00 and then at this week’s low of $25.82. Wyckoff's Market Rating: 5.5.