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Gold, silver see weak long liquidation ahead of FOMC results

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(Kitco News) - Gold and silver prices are lower and near their daily lows in midday U.S. trading Tuesday. Featured in both metals today is the weak-handed bulls exiting their long futures positions before Wednesday afternoon’s results of the FOMC meeting that began Tuesday morning. August gold futures were last down $10.40 at $1,854.20 and July Comex silver was last down $0.464 at $27.575 an ounce.

The metals may have also been pressured somewhat by the May producer price index that came in hotter than expected, at up 0.8% from April and up 6.6%, year-on-year. PPI was expected to come in at up 0.5% from April. The bearish argument for metals is that the PPI numbers suggest the Federal Reserve will have to tighten monetary policy sooner. However, historically, rising inflation has been a bullish element for the metals, as they are seen as a hard-asset hedge against inflation.

Today’s U.S. retail sales report for May came in a bit weaker than expected, at down 1.3% versus forecasts for down 0.6% from April.

Global stock markets were mostly firmer overnight. U.S. stock indexes are lower at midday on profit taking after the S&P 500 and Nasdaq stock index futures hit record highs overnight. The past several weeks have seen little risk aversion in the marketplace and that’s been bullish for the global stock markets and bearish for the safe-haven metals.  

The Federal Reserve’s FOMC meeting began Tuesday morning and ends Wednesday afternoon with a statement. While no major changes are expected for U.S. monetary policy, focus will be on the Fed’s tenor on inflation prospects and when the central bank will start to taper its very easy money policies. Fed officials recently have hinted they will begin discussing a timetable for reducing its bond-buying program (quantitative easing) sooner rather than later. Fed Chair Jerome Powell’s press conference after the FOMC statement will be very closely scrutinized.

The key outside markets today see the U.S. dollar index jut a bit firmer. Nymex crude oil prices are up and trading around $71.75 a barrel after hitting a 2.5-year high of $72.03 in early trading. The key U.S. Treasury 10-year note yield is fetching 1.49%.

Live 24 hours gold chart [Kitco Inc.]

Technically, August gold futures prices were poised to closed at a four-week low close today. The gold bulls still have the overall near-term technical advantage. However, they are fading as a nine-week-old price uptrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,810.70. First resistance is seen at today’s high of $1,870.90 and then at this week’s high of $1,879.70. First support is seen at this week’s low of $1,845.70 and then at $1,840.00. Wyckoff's Market Rating: 6.0

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures bulls still have the overall near-term technical advantage. However, a nine-week-old uptrend on the daily bar chart has been negated. Silver bulls' next upside price objective is closing prices above solid technical resistance at the May high of $28.90 an ounce. The next downside price objective for the bears is closing prices below solid support at $26.00. First resistance is seen at this high of $28.16 and then at last week’s high of $28.445. Next support is seen at today’s low of $27.485 and then at $27.31. Wyckoff's Market Rating: 6.0.

July N.Y. copper closed down 1,910 points at 433.60 cents today. Prices closed nearer the session low and hit a seven-week low today. The copper bulls still have the overall near-term technical advantage but are fading. A four-week-old downtrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 470.70 cents. The next downside price objective for the bears is closing prices below solid technical support at 400.00 cents. First resistance is seen at 440.00 cents and then at 450.00 cents. First support is seen at today’s low of 431.55 cents and then at 425.00 cents. Wyckoff's Market Rating: 6.5.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.