Gold, silver in price downdrafts as Fed turns more hawkish
(Kitco News) - Gold and silver prices are sharply down and hit five-week lows in early U.S. trading Thursday.
The metals are seeing a very bearish reaction to Wednesday afternoon’s Federal Reserve Open Market Committee (FOMC) meeting that was deemed hawkish on U.S. monetary policy. August gold futures were last down $77.60 at $1,782.60 and July Comex silver was last down $1.407 at $26.405 an ounce.
The surprisingly hawkish FOMC meeting results from the Federal Reserve Wednesday afternoon roiled many markets, including equities, currencies and bonds. The Fed left U.S. monetary policy unchanged, as expected. However, more FOMC members are now leaning toward raising interest rates sooner than they reckoned earlier this year due to a stronger-rebounding U.S. economy, the receding pandemic and inflation worries. On the inflation front, the Fed said prices are rising but still not at a problematic rate. The Fed sees inflation in 2021 at 3.4% annually, up a full 1% from the 2.4% estimate forecast earlier this year. Recent U.S. inflation reports are running significantly hotter than the 3.4% annual Fed projection on inflation. At Fed Chairman Jerome Powell’s press conference, he did not assuage inflation worries, ostensibly saying the Fed really does not know how much or for how long inflationary pressures will be on the rise.
The U.S. dollar index has rallied sharply and hit a two-month high overnight and bond and note yields up-ticked. The yield on the benchmark U.S. 10-year Treasury note is fetching 1.56% Thursday morning, after trading below 1.5% earlier this week. Rising bond yields and an appreciating greenback are bearish elements for the metals markets.
U.S. economic data released this morning did not impact the markets and is being overshadowed by the FOMC meeting amid traders and investors still buzzing about it.
Meantime, Brazil’s central bank raised its benchmark interest rate for the third consecutive time to thwart accelerating inflation. The rate was increased by 75 basis points, to 4.25%. The central bank is planning another 75 basis point rise at its next meeting in August. Meantime, inflation in Brazil rose to 8.1% in May, which is more than double this year’s goal of 3.75%.
The other key outside market today sees Nymex crude oil prices are down a bit and trading around $71.80 a barrel after hitting a 2.5-year high of $72.99 Wednesday.
Technically, August gold futures bulls have lost their overall near-term technical advantage. Prices have dropped well below the key 200-day moving average. A nine-week-old price uptrend on the daily bar chart has been soundly negated. Bulls’ next upside price objective is to produce a close above solid resistance at $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at $1,800.00 and then at today’s high of $1,826.40. First support is seen at today’s low of $1,776.20 and then at $1,750.00. Wyckoff's Market Rating: 5.0
The silver bulls have lost their overall near-term technical advantage with this week’s selling pressure. Silver bulls' next upside price objective is closing July futures prices above solid technical resistance at $28.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $25.00. First resistance is seen at $27.00 and then at today’s high of $27.32. Next support is seen at today’s low of $26.25 and then at $26.00. Wyckoff's Market Rating: 5.0.