Gold, silver pounded by inflation fears, strong greenback
(Kitco News) - Gold and silver futures prices are sharply lower in midday U.S. trading Thursday. The precious metals are getting hammered following a more-hawkish-than-expected Federal Reserve meeting and some upbeat U.S. economic data—both of which have helped push the U.S. dollar index to a 1.5-year high today. February gold futures were last down $36.10 at $1,793.50 and March Comex silver was last down $1.142 at $22.655 an ounce.
I've been involved in the markets full-time for almost 40 years. I've this this many times before: Traders are fickle, especially on a short-term markets basis. The gold and silver markets are selling off sharply recently due to a tighter Federal Reserve (and other central banks') monetary policies, after having been boosted by looser monetary policies for several years. Yet, the tighter monetary policies are being implemented mainly due to rising inflation fears. Historically, rising inflation has been bullish for hard assets like precious metals. My bias is that as inflation continues to bite, gold and silver markets will respond, overall, in a longer-term bullish fashion.
Today's U.S. four-quarter gross domestic product report showed a rise of 6.9% versus expectations for a rise of 5.5%. The closely watched inflation indicator, the personal consumption expenditures (PCE) index, came in at a hot 6.5% annual rate in the fourth quarter. U.S. weekly jobless claims data was also upbeat. The data helped to rally the U.S. dollar index, which helped to push the gold and silver markets lower.
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Global stock markets were mostly lower overnight. U.S. stock indexes are mixed at midday. The marketplace is still jittery Thursday morning following the conclusion of the Federal Reserve's Open Market Committee (FOMC) meeting Wednesday afternoon. The FOMC statement did not move markets much, but Fed Chairman Powell's press conference saw Powell seemingly lean more hawkish than most expected. Powell gave no specific timeframe on upcoming rate increases and said the Fed will be "nimble." The marketplace wanted more clarity on timing of the rate hikes and did not get it. In fact, Powell's presser may have made the Fed's monetary policy even less clear. And markets don't like uncertainty. Still, many are thinking the Fed will make five interest rate increases within the next year. Fed watchers also think the central bank might start to shrink its balance sheet faster than what had been expected (quantitative tightening). "The Fed seems to be in a hurry now," said one analyst.
Powell's comment yesterday that the U.S. labor markets conditions are consistent with maximum employment means that the central bank is firmly focused rising inflation. This morning's core personal consumption expenditures number for the fourth quarter appears to corroborate Powell's hawkish comments on Wednesday afternoon.
Still on the front-burner of the marketplace is the Russia showdown with Western nations as Russia appears poised to invade Ukraine. NATO allies are sending arms to Ukraine and putting NATO troops on higher alert, including 8,500 U.S. troops. Russian demands on Ukraine not being able to join NATO have been rejected by the U.S. This situation appears to be deteriorating and will likely get worse before it gets better.
The key outside markets today see crude oil prices weaker and trading around $87.00 a barrel after hitting a seven-year high early on today. The U.S. dollar index is solidly higher and hit a 1.5-year high today. The U.S. Treasury 10-year note yield is presently fetching 1.82%--up from earlier this week.
Technically, February gold futures prices hit a three-week low today. Bulls still have the slight overall near-term technical advantage but are fading. A six-week-old uptrend on the daily bar chart has been at least temporarily negated. Bulls' next upside price objective is to produce a close above solid resistance at the January high of $1,854.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the December low of $1,753.00. First resistance is seen at $1,800.00 and then at $1,815.00. First support is seen at the January low of $1,781.30 and then at $1,775.00. Wyckoff's Market Rating: 5.5
March silver futures prices hit a three-week low today. The silver bears have gained the overall near-term technical advantage. A six-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 $24.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the December low of $21.41. First resistance is seen at $23.00 and the at $23.50. Next support is seen at $22.50 and then at $22.25. Wyckoff's Market Rating: 4.0.
March N.Y. copper closed down 905 points at 442.55 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart, but just barely. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the January high of 460.10 cents. The next downside price objective for the bears is closing prices below solid technical support at the January low of 431.35 cents. First resistance is seen at today's high of 449.10 cents and then at this week's high of 453.80 cents. First support is seen at 440.00 cents and then at last week's low of 437.60 cents. Wyckoff's Market Rating: 6.0.