(Kitco News) - Gold and silver prices are strongly lower in early U.S. trading Thursday, following a surprisingly hawkish turn from the U.S. central bank Wednesday afternoon. Gold prices hit a four-week low and silver prices a three-month low. February gold was last down $39.10 at $2,614.20 and March silver was down $1.125 at $29.615.
U.S. stock index futures have rebounded and U.S. Treasuries have steadied overnight after the Federal Reserve’s surprisingly hawkish pivot on U.S. monetary policy Wednesday afternoon. While the Fed announced a 25 basis-point interest rate cut, as expected, the FOMC’s quarterly summary of economic projections (dot plots) showed the majority of FOMC members now expect just 50 basis points in rate cuts in 2025. That’s a major change in the FOMC’s thinking since the last dot plot meeting in September, when the FOMC forecast was for 100 basis points in rate cuts in 2025. The hawkish pivot sunk precious metals, saw a big surge in the U.S. dollar index and in Treasury bond yields.
Fed Chairman Jerome Powell said in his post-FOMC press conference this is a “new phase” where inflation concerns are back on the table. While the new policy setting is still “meaningfully restrictive,” that’s what it needs to be, because inflation remains above the 2% target, he said. “We still have work to do” to bring down inflation, said Powell.
Asian and European stock indexes were mostly lower overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, on a modest rebound following Wednesday’s sharp sell-off that pushed the S&P 500 futures to a six-week low, saw the index suffer its biggest Fed decision-day loss since 2001 and the biggest one-day loss since the pandemic in 2020.
Meantime, a stopgap U.S. government funding deal has fallen apart following opposition from President-elect Trump, increasing the likelihood of a government shutdown this week. If the debt ceiling isn't raised and the U.S. government shuts down, that would “definitely lead to chaos,’’ said a Bloomberg report. “U.S. equities may be hit but any spike in U.S. yields may drag down rest of the world," said the report.
In other news, the Bank of Japan held rates steady. The Bank of England held its rates steady at its meeting today and has warned of caution ahead as stagflation looms for the U.K. economy.
The key outside markets today see the U.S. dollar index near steady. Nymex crude oil futures prices are modestly down and trading around $70.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.528%--the highest since May.
U.S. economic data release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, third-quarter GDP, revised corporate profits, existing home sales, leading economic indicators, the Kansas City Fed manufacturing survey, and Treasury international capital data.
Technically, February gold futures bulls have the slight overall near-term technical advantage but are fading. A price uptrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close above solid resistance at $2,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the November low of $2,565.00. First resistance is seen at the overnight high of $2,640.90 and then at $2,650.00. First support is seen at the overnight low of $2,596.70 and then at 2,580.00. Wyckoff's Market Rating: 5.5.
March silver futures bears have gained the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $31.50. The next downside price objective for the bears is closing prices below solid support at the August low of $27.39. First resistance is seen at the overnight high of $30.14 and then at $30.50. Next support is seen at $29.50 and then at $29.00. Wyckoff's Market Rating: 4.0.
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