Price pullbacks in gold, silver as USDX, bond yields on the rise again
(Kitco News) - Gold and silver prices are moderately lower in early U.S. trading Thursday. Bulls could not show the important follow-through buying strength after solid gains posted Wednesday. On Thursday the U.S. dollar index and government bond yields are on the rise again, to put price pressure on the precious metals. December gold was last down $11.70 at $1,658.30 and December silver was down $0.28 at $18.60.
Global stock markets were mixed but mostly lower overnight. U.S. stock indexes are pointed to lower openings when the New York day session begins. The marketplace was briefly assuaged by the Bank of England's surprise announcement Wednesday that it will begin purchases of U.K. government bonds in order to stabilize the rattled U.K. bond market. However, markets quickly brushed aside the move as being insufficient. Risk aversion remains elevated late this week. Government bond yields and the U.S. dollar are on the rise again as the marketplace is spooked by rising inflation, the specter of global economic recession, and currency and financial markets instability.
The U.K. government has created a "loop of doom" that threatens the entire financial system and they must act urgently, said Nigel Green of the DeVere Group. "Markets now know where the weakness lies. Intervention paints a target on the back of the body that intervenes." If the U.K. government does not change its tax and spending plans, "they will have blown up the U.K. mortgage market, U.K. pensions, amongst others, and eventually (a contagion) could spread to the wider global financial markets which themselves are sitting on thin ice as liquidity disappears," said Green. His comments came after the Bank of England stepped in to buy U.K. bonds Wednesday. The BOE's announcement "is the right thing to do, of course, but it seems ludicrous that it has had to act in this way," said Green. The International Monetary Fund warned the U.K. government over its plan for tax cuts and spending, saying such is likely to increase inequality and add to pressures pushing up prices.
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Read a Barron's headline today: "Things are starting to break. But the Fed and BOE aren't done hiking."
The key outside markets today see Nymex crude oil prices slightly firmer and trading around $82.50 a barrel. Meantime, the yield on the 10-year U.S. Treasury note is rising and presently fetching 3.836% after rising above 4.0% overnight. The 2-year Treasury note yield is 4.4%.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the third estimate of second-quarter GDP, and revised corporate profits.
Technically, the December gold futures bears have the solid overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at this week's high of $1,671.60 and then at $1,685.00. First support is seen at the overnight low of $1,649.30 and then at this week's low of $1,622.20. Wyckoff's Market Rating: 1.5
September silver futures bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $19.50. The next downside price objective for the bears is closing prices below solid support at the September low of $17.40. First resistance is seen at $19.00 and then at $19.25. Next support is seen at $18.295 and then at $18.00. Wyckoff's Market Rating: 2.5.