(Kitco News) - Gold and silver prices are strongly lower in midday U.S. trading Thursday, following a surprisingly hawkish turn by the U.S. Federal Reserve Wednesday afternoon. Gold prices hit a four-week low and silver prices a three-month low. February gold was last down $46.30 at $2,607.00 and March silver was down $1.48 at $29.26.
The precious metals bulls are reeling 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 produced 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.
Safe-haven gold and silver may get a reprieve as soon as Friday. 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. If markets get more nervous about a prolonged U.S. government shutdown, gold and silver may be supported.
The key outside markets today see the U.S. dollar index higher and hit a two-year high. Nymex crude oil futures prices are modestly down and trading around $70.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.6%--the highest since May.
Technically, February gold futures bulls have lost their slight overall near-term technical advantage. 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 today’s low of $2,596.70 and then at 2,580.00. Wyckoff's Market Rating: 5.0.
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 $31.00. 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 $30.00 and then at $30.50. Next support is seen at today’s low of $29.145 and then at $29.00. Wyckoff's Market Rating: 3.5.
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