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Gold, silver sell off after surprisingly hot U.S. inflation

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(Kitco News) - A hot U.S. inflation report “wrong-footed” the marketplace Tuesday, pushing gold and silver prices solidly down and sending the U.S. dollar index and bond yields higher. The U.S. stock market tumbled but the precious metals could garner no strong safe-haven bids. October gold was last down $27.20 at $1,703.70 and December silver was down $0.425 at $19.435.

The August consumer price index came in up 8.3%, year-on-year, compared to forecasts for up 8.0%. On a monthly basis, however, the August CPI rose 0.1% from July after being expected to decline 0.1%. The July CPI report showed an 8.5% rise, annually. The food and energy component of the August CPI report was up 0.6%, which was double the expectations for a rise of 0.3%. There had been some signs in the U.S. economy that inflation in the U.S. was cooling off a bit, but today's CPI data suggests inflation is still running hot and may get hotter. Today's data pretty much assures the Federal Reserve's FOMC next week will raise the main U.S. interest rate, the Fed funds rate, by at least 0.75%. Fed funds rate futures are suggesting a slight chance the FOMC could even rase the Fed funds rate by 1.0% at next week's FOMC meeting.

U.S. stock indexes were pointed to higher openings when the New York day session begins, but then sold off sharply in the wake of the CPI report. The stock index bulls had some momentum built up after performing well in early September—a month that can be cruel to the stock market. However, today's big losses wiped out that bullish momentum in stocks. Safe-haven gold and silver bulls have been stymied lately by the lack of safe-haven buying when the stock markets sell off. It appears metals traders are more focused on the aspect of slowing consumer and commercial demand for metals amid tighter monetary policies and the accompanying slowing economic growth rates.


Silver prices see short squeeze, testing resistance near $20, up 6% on weak dollar

The key outside markets today see Nymex crude oil prices weaker and trading around $87.00 a barrel. The U.S. dollar index is sharply higher in midday U.S. trading and rebounded from lower levels overnight after the CPI report. The yield on the 10-year U.S. Treasury note rose after the CPI report and is fetching 3.427%. 

Live 24 hours gold chart [Kitco Inc.]

Technically, October gold futures bears have the solid overall near-term technical advantage and gained fresh power today. Bulls' next upside price objective is to produce a close above solid resistance at $1,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the July low of $1,686.30. First resistance is seen at $1,725.00 and then at this week's high of $1,736.40. First support is seen at today's low of $1,696.90 and then at $1,686.30. Wyckoff's Market Rating: 1.5.

Live 24 hours silver chart [ Kitco Inc. ]

December silver futures bears have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $21.00. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at $20.00 and then at $20.25. Next support is seen at $19.00 and then at $18.445. Wyckoff's Market Rating: 3.0.

December N.Y. copper closed down 515 points at 355.95 cents today. Prices closed nearer the session low today. The copper bears have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the August high of 378.35 cents. The next downside price objective for the bears is closing prices below solid technical support at the July low of 315.55 cents. First resistance is seen at today's high of 369.25 cents and then at 378.35 cents. First support is seen at this week's low of 353.20 cents and then at 350.00 cents. Wyckoff's Market Rating: 3.5.

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.