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Gold sells off after early solid gains, as Powell leans hawkish

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(Kitco News) - In what may be one of the most important trading days of the year, gold and silver prices are lower in midday U.S. trading Tuesday and lost good early gains as Fed Chairman Jerome Powell "wrong-footed" the marketplace by suggesting that a tighter U.S. monetary policy is necessary to keep inflation at bay and to keep supply chains moving along. The U.S. dollar index regained most of its sharp, early losses on Powell's remarks and that was bearish for the metals. Also, Nymex crude oil prices tanked to a three-month low of $65.65 as of this writing, also negative for the metals and the raw commodity sector. February gold was last down $13.90 at $1,771.50 and March Comex silver was last down $0.082 at $22.77 an ounce.

Traders and investors very closely monitored comments from Powell and Treasury Secretary Janet Yellen in their testimony to the Senate Banking Committee today—especially in light of the new Omicron scare. Powell said the monthly U.S. bond-buying program of the Fed needs to be tapered earlier as the Fed chair seemed to be more worried about supply-chain disruptions from the new coronavirus strain that is prompting new concerns about major economies once again being crimped by business lockdowns. Powell seemed less concerned about the demand side of economies during any surge in the Omicron strain. He also implied that if new strains continue to develop, fresh monetary stimulus programs would have limited positive impacts on economies. His comments flow in the face of many market watchers who thought the Federal Reserve could be forced to dial back its recently announced tapering of its bond-buying program.

The U.S. stock market sold off sharply on Powell's comments. Remember, for the past dozen years the U.S. stock market has been goosed higher by easy-money policies from the Fed that seemed to trump any other market fundamentals, regarding the trajectory of stock prices. Now, that worm may have turned.

Gold price sheds gains as Powell talks more aggressive tapering, wants to drop 'inflation is transitory' term

What metals traders seemed most concerned about today was a tighter U.S. monetary policy putting the brakes on rising inflation, which is historically bullish for hard assets, including the metals. The U.S. Treasury bond markets today saw falling yields, which appear to suggest bond market traders think the Fed can get a grip on controlling inflation sooner rather than later.

Global stock markets were mixed to lower in overnight trading. Risk aversion was already keener Tuesday as there are still major unknowns regarding the new Omicron strain of the coronavirus, including how effective current vaccines are at fighting it. Regeneron Tuesday morning said its antibody drug is less effective on the Omicron strain. Moderna said Omicron's many mutations suggest a new vaccine will be needed.

In other overnight news, the Euro zone's consumer price index for November came in hot, at up 4.9% year-on-year, for the highest reading in 30 years. Energy prices were up 27.4%, year-on-year.

The key "outside markets" see Nymex crude oil prices sharply lower, hitting a three-month low and trading around $65.75 a barrel. The U.S. dollar index is slightly lower and erased early strong gains. Meantime, The yield on the U.S. Treasury 10-year note is presently fetching 1.443%, which is well down from the 1.529% reading Monday.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and chain store retail sales reports, the S&P/Case-Shiller home price index, the ISM Chicago business survey, and the consumer confidence index.

Live 24 hours gold chart [Kitco Inc.]

Technically, February gold futures prices hit a three-week low and scored a big and bearish "outside day" down on the daily bar chart today. Bulls have lost their slight overall near-term technical advantage. A two-month-old uptrend on the daily bar chart has stalled out. Bulls' next upside price objective is to produce a close above solid resistance at $1,840.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the November low of $1,761.00. First resistance is seen at $1,785.00 and then at $1,800.00. First support is seen at $1,761.00 and then at $1,750.00. Wyckoff's Market Rating: 5.0

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures prices hit another six-week low today. The silver bears have the firm overall near-term technical advantage. Prices are trending lower again on the daily bar chart. 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 the September low of $21.46. First resistance is seen at this week's high of $23.46 and then at last Friday's high of $23.77. Next support is seen at $22.50 and then at $22.40. Wyckoff's Market Rating: 3.0.

March N.Y. copper closed down 890 points at 425.25 cents today. Prices closed near the session low today. The copper bears have regained the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at this week's high of 451.15 cents. The next downside price objective for the bears is closing prices below solid technical support at the November low of 420.00 cents. First resistance is seen at 432.00 cents and then at this week's high of 438.15 cents. First support is seen at today's low of 425.05 cents and then at 420.00 cents. Wyckoff's Market Rating: 4.0.

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.