(Kitco News) - Gold and silver prices are higher in early U.S. trading Wednesday, with buying interest supported by a weaker U.S. dollar index and firmer crude oil prices. U.S. Treasury yields have also down-ticked a bit at midday. Perceived bargain hunting after Tuesday’s losses is also featured in both precious metals markets. June gold was last up $56.80 at $4,777.30. May silver prices were up $1.58 at $78.07.
Latest on the war in the Middle East…
--U.S.-Iran ceasefire indefinitely extended but peace talks on hold
--Ships come under Iran gunfire near Strait of Hormuz, U.K. navy says
--Iran oil tankers go dark to sneak past U.S. blockade
--Trump says U.S. caught Chinese ‘gift’ for Iran, testing red line
President Trump indefinitely extended a ceasefire with Iran as peace talks remain on hold, walking back threats to resume fighting even as the Strait of Hormuz remains all but shut. Trump said Pakistan, the main mediator between the warring sides, asked the U.S. to hold off on fresh strikes, something Tehran denied was the case. Washington is extending the truce — which began just over two weeks ago — until Iran submits a new proposal “and discussions are concluded, one way or the other,” Trump said on Truth Social late Tuesday. There’s still no sign the vital Strait of Hormuz will be reopened to oil and gas shipments soon. The U.S. and Iran seem closer to resolving longer-term issues such as the status of Iran’s nuclear and missile programs.
China’s central bank adds stimulus… China's central bank has injected more cash into the banking system, signaling unusual tolerance for abundant liquidity and boosting confidence that the bond rally may have further to run. The People's Bank of China added a net 9.5 billion yuan using seven-day reverse repos on Tuesday and Wednesday, with the move suggesting policymakers are prioritizing low funding costs and smooth government financing to support the economy. Authorities will start selling ultra-long special government bonds this week as part of a 1.3 trillion-yuan plan, with a total of 119 billion yuan of 20- and 30-year notes to be offered Friday.
Crude-oil-shipping constraints will linger for months after war ends… The impact on crude oil flows from the U.S.-Iran war will continue for months even after any deal to restore shipping through the Strait of Hormuz, the world’s largest oil traders have warned and as reported by Bloomberg. “Executives at some of the world’s largest oil traders warned that the rewiring of the oil market would take months even if a peace deal is agreed soon, and that prices will need to ratchet higher to the point of pushing the global economy toward a recession if the conflict continues. The oil market faces a guaranteed supply loss and executives and analysts warned that the oil market will come under growing strain if a resolution isn’t reached soon, with some saying that flows through the waterway may never return to normal,” said the report.
Big global oil firms raking in big profits… The world’s biggest energy traders are seeing high profits due to disruption to oil markets caused by the war in Iran, Bloomberg reported. “Several commodity traders, including Vitol Group and Trafigura Group, have reported some of their best-ever quarters, with profits driven by huge dislocations across energy markets. The profits have been driven by premiums on immediately available cargoes of oil and fuel products, with some trades reportedly making profits of as much as $20 to $30 a barrel,” said the report.
The key outside markets see Nymex WTI crude oil prices firmer and trading around $90.00 a barrel. The U.S. dollar index is a bit weaker. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.28 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, June gold futures bulls’ next upside price objective is to produce a close above solid resistance at $5,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,500.00. First resistance is seen at $4,800.00 and then at this week’s high of $4,854.80. First support is seen at this week’s low of $4,733.10 and then at $4,700.00. Wyckoff's Market Rating: 6.0.
May silver futures bull’s next upside price objective is closing prices above solid technical resistance at $85.00. The next downside price objective for the bears is closing prices below solid support at $70.00. First resistance is seen at this week’s high of $80.755 and then at last week’s high of $83.245. Next support is seen at this week’s low of $75.38 and then at $75.00. Wyckoff's Market Rating: 6.0.
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