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Gold price plummets as Fed's Powell drops the hammer

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(Kitco News) - Gold and silver prices are sharply lower in early U.S. trading Thursday, with gold scoring a six-week low. Federal Reserve Chairman Jerome Powell on Wednesday afternoon surprised the marketplace by doubling down on the U.S. central banks aggressive inflation fight—sending the U.S. dollar index sharply higher, U.S. Treasury yields higher and U.S. stock indexes solidly lower. December gold was last down $31.20 at $1,618.70 and December silver was down $0.744 at $18.85.

The Federal Reserve's Open Market Committee (FOMC) statement Wednesday afternoon initially was viewed as less hawkish. The U.S. central bank raised its main Fed funds rate by 0.75%, to 4.0%, as expected. The FOMC statement said the Fed will take into consideration the health of the U.S. economy after its recent "cumulative tightening." The markets initially read that statement as leaning less hawkish on U.S. monetary policy going forward. The U.S. dollar index sold off and U.S. Treasury yields dropped, while U.S. stock indexes and gold rallied. However, once Fed Chairman Powell started speaking at his press conference and took a still-hard line on the Fed's intent to keep raising rates to stop problematic price inflation, the aforementioned markets promptly reversed course. "Powell dropped the hammer," quipped one business TV anchor. Powell in his presser implied the Fed's terminal interest rate may have to rise higher than earlier Fed expectations—likely above 5%--and stay at that higher level for longer. Notions of a Fed pivot on its aggressive monetary policy tightening were dashed at Powell's presser. Read a Barron's headline today: "Powell zigged when markets wanted a zag: expect higher rates for longer."

Global stock markets were mostly lower overnight. U.S. stock indexes are headed for lower openings when the New York day session begins. Risk-off attitudes are keener in the marketplace late this week.

Powell volatility: Gold price drops as Fed Chair says 'ultimate level' of rates will be higher than previously expected

The Bank of England is holding its regular monetary policy meeting Thursday and is expected to raise its main interest rate by 0.75%.

The key outside markets today see the U.S. dollar index very sharply higher. Nymex crude oil prices are lower and trading around $88.50 a barrel. The 10-year U.S. Treasury note is yielding 4.149%.

Focus will quickly turn to Friday's monthly U.S. employment report for October from the Labor Department. The key non-farm payrolls number is expected to come in at up 205,000, compared to a rise of 263,000 in the September report.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, preliminary productivity and costs, the U.S. services PMI, manufacturers' shipments and inventories, and the monthly chain store sales index.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold futures bears have the solid overall near-term technical advantage and have regained downside momentum. 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 the overnight high of $1,643.20 and then at $1,650.00. First support is seen at $1,610.00 and then at $1,600.00. Wyckoff's Market Rating: 1.0

Live 24 hours silver chart [ Kitco Inc. ]

The silver bears have regained the overall near-term technical advantage. A choppy uptrend on the daily bar chart has once again stalled out. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $21.31. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at the overnight high of $19.43 and then at $20.00. Next support is seen at $18.50 and then at $18.25. 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.