Price pressure on gold, silver as Fed signals "higher for longer"

(Kitco News) - Gold and silver prices are sharply down in early U.S. trading Thursday, in the aftermath of the two-day FOMC meeting that concluded Wednesday afternoon with a more hawkish tone than the marketplace was expecting. December gold was last down $27.20 at $1,939.90 and December silver was down $0.401 at $23.435.

The marketplace Thursday is reacting to the hawkish tone of the FOMC meeting of the Federal Reserve Wednesday afternoon, including a press conference from Fed Chairman Powell. Barrons in an article today said, “The central bank succeeded in shifting the focus from anticipation over the timing of the first rate cuts to realization and acceptance that rates will remain higher for longer.”

Said analyst Ed Moya from OANDA: “U.S. stocks dropped and king dollar returned after the Fed kept rates unchanged and signaled one more rate hike will happen this year. The U.S. economy is too strong and this rate-hiking cycle will last a lot longer than Wall Street wants. It is clear that higher-for-longer will be the Fed’s theme for a while…. If we continue to see an extended period of time that the economy performs well, the growth/inflation mix will lead to a harder-hitting lag from their rate-hiking cycle.” 

The Bank of England held its regular monetary policy meeting today and kept its interest rates unchanged, as expected. Meantime, Switzerland’s central bank also held its rates steady after a string of rate hikes.

Asian and European stocks were mostly lower overnight. U.S. stock indexes are pointed to solidly lower openings when the New York day session begins.

The key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are weaker and trading around $89.25 a barrel. The benchmark U.S. Treasury 10-year note yield is presently at a multi-year high and fetching 4.462%. These markets are firmly bearish for the precious metals markets on this day.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, existing home sales and leading economic indicators.

Technically, the gold futures bears have the firm overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at the September high of $1,980.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the August low of $1,913.60. First resistance is seen at the overnight high of $1,952.20 and then at this week’s high of $1,968.90. First support is seen at $1,931.20 and then at the September low of $1,921.70. Wyckoff's Market Rating: 3.0

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may well halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at this week’s high of $23.88 and then at $24.00. Next support is seen at this week’s low of $23.235 and then at $23.00. Wyckoff's Market Rating: 3.5.

If you have not done so, I encourage you to try out my new “Markets Front Burner” email report. I think it’s one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It’s a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter .

By

Jim Wyckoff

For Kitco News

Follow @jimwyckoff

jwyckoff@kitco.com

www.kitco.com