Price gains in gold, silver amid weaker USDX, higher crude
(Kitco News) - Gold and silver prices are higher in early U.S. trading Wednesday. The key outside markets are in a daily bullish posture for the metals at mid-week, as the U.S. dollar index is a bit weaker and crude oil prices are sharply up. There remains a bit of safe-haven demand for the precious metals as there is still some uncertainty and anxiety in the marketplace. February gold was last up $10.80 at $1,787.40 and March Comex silver was last up $0.085 at $22.89 an ounce.
In what may have been one of the most important trading days of the year, or even beyond, Tuesday, Fed Chairman Jerome Powell stunned the marketplace by suggesting a tighter U.S. monetary policy is necessary to keep rising inflation at bay and to keep supply chains moving along, especially if the new Omicron strain spreads rapidly worldwide. Powell also admitted that what the Fed had termed "transitory" inflation was incorrect and the central bank would abandon the term. Powell seemed less concerned about the demand side of economies during any new business and public lockdowns that might come from a surge in the Omicron strain. He also implied that if new virus strains continue to develop, new monetary stimulus programs would have limited positive impacts on economies. Many market watchers thought the Federal Reserve would be forced to dial back its recently announced tapering of its bond-buying program if Omicron started to rage. After Powell's remarks Tuesday, financial markets estimated a 50-50 chance the Fed will raise U.S. interest rates as early as May of 2022. Powell and Treasury Secretary Janet Yellen speak in front of the U.S. House of Representatives today.
The U.S. stock market Tuesday sold off sharply on Powell's comments. For the past dozen years the U.S. stock market has been boosted by the high levels of liquidity in financial markets, due to monetary policy stimulus. If the global central banks take away the proverbial punch bowl from traders and investors, one has to wonder if the equities markets can continue their years-long trek higher.
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What metals traders seemed most concerned about Tuesday was a tighter U.S. monetary policy halting rising inflation sooner rather than later. Remember that hard assets, including metals, have been a historical hedge against rising inflation. Importantly, the U.S. Treasury market Tuesday saw falling yields on the longer-dated maturities, which suggests bond market traders do indeed believe the Fed can successfully tamp down rising inflation in the coming months.
Global stock markets were mostly higher in overnight trading. The U.S. stock indexes are pointed to solidly higher openings when the New York day session begins. Trading has been choppy in the stock indexes this week, amid the new uncertainty about the Omicron coronavirus strain.
In other overnight news, the Paris-based OECD think tank forecast rising global inflation in 2022, including predicting U.S. annual inflation at 4.4% and Euro zone inflation at 2.7%. Both of those numbers are above the OECD's September forecasts.
The key "outside markets" see Nymex crude oil prices solidly higher and trading around $69.00 a barrel, after hitting a three-month low of $64.43 on Tuesday. There is an OPEC meeting today that will be closely monitored. The U.S. dollar index is slightly lower. Meantime, The yield on the U.S. Treasury 10-year note is presently fetching 1.492%.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. manufacturing PMI, the ISM report on business manufacturing, the global manufacturing PMI, construction spending, the weekly DOE liquid energy stocks report, domestic auto industry sales and the Fed's beige book.
Technically, February gold futures bulls have the slight overall near-term technical advantage. A two-month-old uptrend on the daily bar chart is still alive, but just barely. Bulls' next upside price objective is to produce a close above solid resistance at last week's high of $1,853.00. 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 the overnight high of $1,795.70 and then at $1,800.00. First support is seen at $1,775.00 and then at this week's low of $1,771.20. Wyckoff's Market Rating: 5.5
The March silver bears have the overall near-term technical advantage. Prices have been trending down for nearly three weeks. Silver bulls' next upside price objective is closing December futures 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 $23.77. Next support is seen at today's low of $22.65 and then at $23.40. Wyckoff's Market Rating: 3.0.