(Kitco News) - Gold and silver prices are lower in early U.S. trading Monday, on increasing marketplace worries that the war in Iran will cause global stagflation that includes higher interest rates. April gold was last down $65.50 at $5,092.00. May silver prices were down $0.906 at $83.35.
Stagflation concerns grip stock, financial markets. 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.
Latest on the war in Iran:
-- Fitch Ratings says Strait of Hormuz closure likely temporary
--Iran signals no letup as Khamenei’s hardline son becomes leader
--Brent crude oil pares gains after soaring to $119.50 a barrel
--G-7 to discuss release of oil from IEA reserves to tame prices
--U.S., European shares drop, after South Korea, Japan lead Asian slump
--President Trump to address House Republicans on today 7 a.m. CDT
--$100 oil shock set to strain Asia’s cash-strapped governments
-- Economist Ed Yardeni raises odds of U.S. stock market meltdown to 35% on Iran war
--U.S. considers idea of special operation to seize Iran’s uranium
China’s central bank still stocking up on gold. 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.
G7 to discuss joint release of oil reserves. G7 finance ministers will discuss a possible joint release of petroleum from reserves coordinated by the International Energy Agency, in an emergency meeting on Monday aimed at tackling the surge in oil prices following the conflict in the Gulf, according to the Financial Times. “The ministers and Fatih Birol, IEA executive director, will hold a call at 8.30 a.m. New York time to discuss the impact of the Iran war, according to people familiar with the situation, including a senior G7 official. Three G7 countries, including the U.S., have so far expressed support for the idea, according to the people familiar with the talks,” said the Times. “The 32 members of the IEA hold strategic reserves as part of a collective emergency system designed for oil price crises. One person said some U.S. officials believe a joint release in the range of 300 million to 400 million barrels — 25 to 30 percent of the 1.2 billion barrels in the reserve — would be appropriate, said the report.
Weak U.S. jobs report tilts at least one Fed official more dovish. Federal Reserve Vice Chair for Supervision Michelle Bowman signaled the weaker-than-expected February U.S. employment report has tilted her back to supporting additional interest-rate cuts. “I was fine with holding at our January meeting, but now that we’ve seen that the labor market, maybe that was an anomaly,” Bowman said in an interview Friday on Fox Business and as reported by Bloomberg, referring to strong January job creation. The new jobs data “confirms to me that the labor market continues to be weak, and it could use some support from our policy rate,” she said. Fed officials gather for their next FOMC policy meeting March 17-18.
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 $103.00 a barrel after spiking to near $120.00 overnight. The yield on the benchmark 10-year U.S. Treasury note is presently 4.18 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 $5,002102 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 overnight high of $85.30 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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