Mild price pressure on gold, silver as USDX firm, U.S. bond yields rise

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(Kitco News) - Gold and silver prices are modestly down in early U.S. trading Thursday. The precious metals are feeling the pressure of a rally in the U.S. dollar index to a four-week high overnight, and by U.S. Treasury yields that are on the rise. December gold was last down $2.40 at $1,972.60 and September silver was down $0.187 at $23.685.

The marketplace has mostly digested the surprise downgrade of the U.S. government’s credit rating by Fitch. It appears the downgrade has cast a bit of a pall over what was a generally upbeat summertime marketplace. The Fitch downgrade came amid no major changes in U.S. government policies or actions recently, but instead appears to be a recognition by Fitch of the bitter partisanship among lawmakers, including over raising the U.S. debt ceiling, in recent years. Some would argue the Fitch news was just an excuse for the U.S. stock indexes to see downside corrections after recent good gains. As for rising bond yields this week, the Treasury yields have actually been trending higher (prices lower) since March. JP Morgan chief Jamie Dimon, when asked about the significance of the Fitch credit downgrade to the U.S., replied that it did not mean much and that the true judge of U.S. creditworthiness is the markets. Ironically, the U.S. dollar saw some safe-haven demand Wednesday, in the wake of the Fitch downgrade.

Asian and European stock markets were mostly lower in overnight trading. U.S. stock indexes are pointed to slightly lower openings when the New York day session begins.

In overnight news, the Bank of England raised its main interest rate by 0.25%, to 5.25%. The move was expected.

Euro zone inflation continued to decline in June, as the producer price index was down 3.4%, year-on-year. That was close to market expectations. The core PPI (excluding food and energy) was up 2.5%, year-on-year.

Traders are awaiting the U.S. data point of the week on Friday: the U.S. employment situation report for July. The key non-farm payrolls number is expected to come in at up 200,000 jobs, compared to a rise of 209,000 in the June report.

The key outside markets today see the U.S. dollar index firmer and at a four-week high. Nymex crude oil prices are near steady and trading around $79.50 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.138%.  

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, the ISM report on business services, manufacturers’ shipments and inventories, the global services PMI and the monthly retail chain store sales index.

Technically, the gold futures bulls and bears are on a level overall near-term technical playing field. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at the July high of $2,028.60. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at $1,980.00 and then at Wednesday’s high of $1,992.20. First support is seen at the overnight low of $1,965.80 and then at $1,950.00. Wyckoff's Market Rating: 5.0

The silver bulls have lost their slight overall near-term technical advantage. Prices are starting to trend lower on the daily bar chart. Silver bulls' next upside price objective is closing September futures prices above solid technical resistance at the July high of $25.475. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at $24.00 and then at $24.50. Next support is seen at the overnight low of $23.565 and then at $23.30. Wyckoff's Market Rating: 5.0.