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Gold, silver pounded on notions of tightening monetary policies

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(Kitco News) - Gold and silver prices are sharply lower in midday U.S. dealings Monday, with gold overnight careening to a more-than-four-month low of $1,676.40, basis October futures, and silver slumping to a more-than-eight-month low of $22.295, basis September futures. However, prices are trading well off their daily lows and near mid-range at midday. October gold futures were last down $34.20 at $1,729.90 and September Comex silver was last down $1.026 at $23.315 an ounce.

The metals are still suffering from the reverberations of last Friday's surprisingly strong U.S. jobs report that pushed the U.S. stock indexes to or near their record highs, rallied the U.S. dollar index, pushed the U.S. Treasury yields up (prices down)—all bearish elements for the metals.

Gold and silver did somewhat recover from their "flash crash" overnight lows. The jobs data Friday immediately set off heightened speculation the Federal Reserve would act sooner to reel in its easy monetary policies. That really spooked the metals markets bulls. Apparently, the metals traders are presently choosing not to focus on the bullish inflationary implications of a rebound in the U.S. economy that is already seeing consumer and producer prices on the rise.

The overnight flash crash in gold and silver prices may also be due to thin trading conditions overnight amid the summertime doldrums. Many traders are on vacation and much of Europe is on holiday during August. Many times the "big boys" like the investment banks will make very big trades in low-volume futures trading conditions, in order to get the maximum bang for their buck, and that may be what happened overnight.

Global stock markets were mixed overnight. The U.S. stock indexes are mixed at midday.

Also in focus to start the trading week is the surging new Covid strain that is forcing major economies once again to assess measures to contain the spread of the virus. China and other parts of Asia are being hit especially hard. The Delta strain surge, if not contained soon, may put a damper on any Federal Reserve notions of acting sooner to taper its bond-buying program (quantitative easing). The Jackson Hole Federal Reserve symposium later this month could be the economic/markets focal point of the summer. That confab in the past has produced significant monetary policy developments.

Somewhat assuaging the Covid concerns in the marketplace early this week is the huge U.S. infrastructure spending plan that appears ready to pass the Congress and become law.

The key outside markets today see the U.S. dollar index higher and hitting a two-week high. Nymex crude oil futures prices are solidly down on the increased Covid worries and trading around $66.65 a barrel. Raw commodity market bulls are watching crude oil closely, knowing that if sector leader crude continues to slide, other commodity markets are likely to be pulled down, too, including the metals.

The yield on the U.S. Treasury 10-year note is presently fetching 1.314%.

Live 24 hours gold chart [Kitco Inc.]

Technically, October gold futures bears have gained the overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at today's low of $1,676.40. First resistance is seen at $1,750.00 and then at today's high of $1,763.00. First support is seen at $1,700.00 and then at $1,676.40. Wyckoff's Market Rating: 3.5

Live 24 hours silver chart [ Kitco Inc. ]

September silver futures bears have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00 an ounce. The next downside price objective for the bears is closing prices below solid support at today's low of $22.295. First resistance is seen at $23.75 and then at $24.00. Next support is seen at $23.00 and then at $22.50. Wyckoff's Market Rating: 3.0.

September N.Y. copper closed down 595 points at 428.85 cents today. Prices closed near mid-range today and hit a two-week low. The copper bulls have the slight overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 450.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the June low of 409.40 cents. First resistance is seen at today's high of 434.35 cents and then at 440.00 cents. First support is seen at today's low of 424.35 cents and then at 420.00 cents. Wyckoff's Market Rating: 5.5.

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.