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Follow-through price gains in gold as bulls gain technical power

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(Kitco News) - Gold prices are higher in early U.S. trading Friday and hit a 2.5-month high, while silver notched a 4.5-month high overnight. The precious metals bulls are charged up late this week as their near-term technical postures have turned bullish at the same time the U.S. dollar index and U.S. Treasury yields are dropping. December gold was last up $11.80 at $1,765.20 and December silver was down $0.082 at $21.62.

Global stock markets were mostly higher overnight. U.S. stock indexes are headed for higher openings when the New York day session begins, on follow-through buying from Thursday's strong gains. The S&P 500 stock index hit a two-month high overnight and the Nasdaq index notched a six-week high. Stock market bulls are still basking in the glow of a slightly cooler U.S. inflation reading released Thursday morning. The consumer price index report for October came in up 7.7%, year-on-year, versus expectations for a rise of 7.9%, year-on-year, and compares to the 8.2% rise seen in the September report. Thursday's CPI print may be the most important data point of the month and even the quarter. The slightly cooler reading in the CPI may prompt the Federal Reserve to back off its aggressive monetary policy tightening. Most in the marketplace now expect a 0.5% Fed funds rate hike at the December FOMC meeting, following a string of 0.75% rate increases this year. A Barron's headline today reads, “The peak in inflation is in sight; markets are going wild.” However, veteran market watchers warn that Thursday's CPI data was just one inflation report, albeit an important one. In all likelihood there will have to be a series of cooler U.S. inflation reports in order to convince the Federal Reserve its inflation-fighting mission is complete. Fed officials have stated several times the central bank cannot err on the side of letting off the monetary-policy-tightening gas too soon.

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A feature in the marketplace late this week has been the plunge in the U.S. dollar index and in U.S. Treasury yields. The USDX continues its drop and hit a 2.5-month low overnight, while the benchmark 10-year U.S. Treasury note sees its yield at 3.811% after trading above 4.0% earlier this week. The U.S. Treasury cash markets are closed today for the Veteran's Day holiday.

Also somewhat bullish for stock and commodity markets are reports China is easing up a bit on some of its strict Covid restrictions.

The crypto currency markets remain shaky late this week. A takeover of likely insolvent FTX crypto exchange by rival Binance fell through, triggering concerns of a wider crypto market illiquidity contagion.

In overnight news, the Euro zone has forecast its inflation rate for 2022 at 8.5%, year-on-year, and at 6.1% in 2023.

The other key outside market today sees Nymex crude oil prices solidly higher.

U.S. economic data due for release Friday is light and includes the University of Michigan consumer sentiment survey.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold futures bulls and bears are back on a level overall near-term technical playing field but the bulls have momentum on their side. This week's bullish upside breakout from the choppy trading range on the daily bar chart suggests still more upside is likely in the near term. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week's low of $1,667.10. First resistance is seen at the overnight high of $1,769.90 and then at $1,778.80. First support is seen at $1,750.00 and then at $1,738.70. Wyckoff's Market Rating: 5.0

Live 24 hours silver chart [ Kitco Inc. ]

The silver bulls have the firm overall near-term technical advantage. A choppy, nine-week-old uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at the overnight high of $22.16 and then at $22.50. Next support is seen at the overnight low of $21.355 and then at $21.00. Wyckoff's Market Rating: 6.5.

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.