(Kitco News) - Gold and silver prices are sharply lower in early U.S. trading Tuesday, as the U.S. dollar index is powering higher and hit a nine-month high today, while at the same time U.S. Treasury yields are on the rise. These two outside markets are so far today trumping the elevated trader/investor anxiety in the general marketplace. April gold was last down $96.30 at $5,214.00. March silver prices were down $6.08 at $82.24.
Latest developments on war in the Middle East…
--China urges “all sides” of the U.S.-Israel war with Iran war to safeguard the Strait of Hormuz
--Iran says Strait of Hormuz is closed to shipping traffic; U.S. denies that claim
--Europe’s natural gas prices jump as much as 33%
--Two drones attack U.S. embassy in Riyadh, Saudi Arabia
--Sec. of War Hegseth rejects “endless” war, while Trump insists no fixed timeline
--Global stock markets lower and trader/investor anxiety increasing
--Iran launched new missile wave on U.S. interests in Qatar, Bahrain, Oman
Iran appears to be deliberately trying to exhaust U.S. air defense systems and missile stocks, according to Marion Messmer, international security program director at Chatham House. The U.S. has been purchasing fewer interceptor missiles annually than it has been using, creating a potential vulnerability, she said in an interview and as reported by Bloomberg. Iran has also threatened to attack any ship entering the Strait of Hormuz.
Middle East war driving up global inflation… Inflation around the world is seen picking up due to the U.S.-Israel war with Iran, according to a global survey of economists by Bloomberg News. “The biggest inflationary threat from the war stems from increased oil and gas prices, as well as knock-on effects from things like higher airfares and distribution costs. The majority of respondents predict the war will have a minimal impact on gross domestic product in either the U.S., eurozone or China, but much will depend on how long the conflict lasts,” said the report.
European Union natural gas prices soar… European natural gas futures extended their rally Tuesday, climbing nearly 40% on the day and at the highest level since 2023, after surging almost 35% on Monday, as escalating tensions in the Middle East heightened concerns over potential disruptions to LNG supplies to Europe. QatarEnergy on Monday halted LNG production after Iranian drones struck the Ras Laffan and Mesaieed facilities, which are responsible for roughly one-fifth of global LNG output. This interruption could affect about 15% of Europe’s LNG imports, tightening global supplies and intensifying competition for alternative sources. These supply risks come at a time when EU gas storage is low, standing at 31%, below the 40% recorded at this time last year. TradingEconomics.com
Oil producers hedge higher prices… Oil producers have locked in crude prices for future sales as the oil market soared Monday after the U.S. and Israel launched strikes on OPEC member Iran, Bloomberg reported. This suggests the producers reckon that the present higher crude oil prices are not sustainable. “AEGIS Hedging Solutions LLC’s oil-focused clients were on standby for the market open, with some ready with limit orders and others queuing up transactions to be executed Monday morning. The surge of hedging activity involved swap contracts, which can be more quickly executed than collar structures, and contributed to steepening backwardation in the futures curve, said the report. “Nearly a quarter of AEGIS Hedging Solutions LLC’s oil-focused clients were on standby for the 6 p.m. ET market open on Sunday, according to the firm, which helps about 350 oil producers with hedging. Some were ready with limit orders, when buyers and sellers set specific price levels for trades, while others queued up transactions to be executed Monday morning,” said Bloomberg.
The key outside markets today see the U.S. dollar index solidly up and hitting a six-week high, with Nymex crude oil prices sharply higher, hitting a nine-month high, and trading around $76.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.1 percent.
Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.
Technically, April gold bulls’ next upside price objective is to produce a close above solid resistance at the contract/record high of $5,626.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $5,000.00. First resistance is seen at $5,250.00 and then at $5,300.00. First support is seen at the overnight low of $5,081.30 and then at $5,000.00. Wyckoff's Market Rating: 6.5.
March silver bulls see their next upside price objective is closing prices above solid technical resistance at this week’s high of $95.86. The next downside price objective for the bears is closing prices below solid support at the February low of $71.815. First resistance is seen at $82.50 and then at $85.00. Next support is seen at $79.00 and then at $77.50. Wyckoff's Market Rating: 6.0.
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