(Kitco News) - Gold prices are lower near midday Monday, on increasing marketplace worries that the war in Iran will cause global stagflation that includes higher interest rates. A firmer U.S. dollar index that hit a 3.5-month high today is also a negative outside-market element for the metals. Silver prices have rebounded from overnight pressure to trade slightly up. April gold was last down $65.50 at $5,092.00. May silver prices were up $0.169 at $84.50.
Optimism for a quick resolution of the conflict in the Middle East is rapidly ebbing in financial markets, with investors pricing in a deeper and longer-lasting supply shock, Bloomberg reports. “The shift in market sentiment gathered pace after President Trump said parts of Iran had yet to be attacked and that $100 crude was ‘a very small price to pay’ for ‘safety and peace,’ undercutting hopes the conflict would be relatively contained. Investors have had to increase their probability of the worst-case scenario, with the challenge being the stagflationary nature of the shock, and are now bracing for a long winter with no clear timeline of an end to it,” said the report. Meantime, International Monetary Fund Managing Director Kristalina Georgieva said lengthy hostilities in the Middle East would risk hitting markets and economies, while throwing up unexpected challenges that require policymakers to prepare for a “new normal.” Georgieva said a 10% increase in energy prices persisting for a year would push global inflation up by 40 basis points and slow economic growth.
In other news, China’s central bank bought more gold in February, extending its streak of purchasing to 16 months, according to a Bloomberg report. “Gold held by the People’s Bank of China rose by 30,000 troy ounces last month to 74.22 million fine troy ounces, according to data released on Saturday. The purchase extends the latest round of accumulation that began in November 2024. Despite recent declines, gold has gained over the past few weeks, clawing its way back above $5,000 an ounce. Investors were seeking safer assets after the U.S. and Israel attacked Iran, intensifying geopolitical risks in the Middle East,” said the report. Global central banks’ gold purchases slowed at the start of the year, as heightened volatility weighed on appetite, according to a note from the producer-funded World Gold Council last week. Net buying, led by Central and East Asian countries, totaled five tons in January, compared with a 12-month average of 27 tons. “Some countries have also sold gold recently, but buying still outweighs selloffs. The head of Poland’s central bank — the world’s biggest reported buyer of bullion — laid out a proposal to sell gold reserves to finance defense spending, whereas both Russia and Venezuela’s central banks have sold gold in recent months,” said the Bloomberg report.
The key outside markets today see the U.S. dollar index higher and at a 3.5-month high, with Nymex crude oil prices solidly higher, at a nearly four-year high, and trading around $98.00 a barrel after spiking to near $120.00 overnight. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.2 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 futures bulls’ next upside price objective is to produce a close above solid resistance at last week’s high of $5,434.10. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $5,000.00. First resistance is seen at the overnight high of $5,210.40 and then at $5,250.00. First support is seen at the overnight low of $5,021.20 and then at $5,000.00. Wyckoff's Market Rating: 7.0.
May silver futures bulls see their next upside price objective is closing prices above solid technical resistance at last 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 the today’s high of $85.435 and then at $87.50. Next support is seen at the overnight low of $79.64 and then at $78.06. Wyckoff's Market Rating: 5.5.
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