(Kitco NewsWire) – Spot gold and silver prices were sharply lower in early U.S. trading Thursday, as renewed attacks on commercial shipping in the Strait of Hormuz and rising Middle East tensions pushed crude oil prices higher, reinforcing inflation concerns and expectations for additional Federal Reserve tightening. Precious metals failed to benefit from lower Treasury yields and defensive demand as the prospect of persistently elevated interest rates continued to weigh on bullion. At the latest verified morning price reading, spot gold was near $4,086.90 an ounce, down $53.40, or 1.29%, while spot silver was near $55.790, down $2.070, or 3.57%.
The latest U.S. labor-market figures provided another indication of economic resilience despite high borrowing costs and weakening housing activity. Weekly initial jobless claims declined by 6,000 to a seasonally adjusted 194,000 in the week ended Oct. 17, below expectations of approximately 200,000 and down from the previous week's upwardly revised 200,000. The four-week moving average fell by 1,000 to 197,750. Continuing claims increased by 25,000 to 1.728 million in the week ended Oct. 10, while the insured unemployment rate remained unchanged at 1.1%. The decline in new claims suggests layoffs remain limited, although rising continuing claims indicate that unemployed workers may be taking longer to find new jobs.
Market positioning continues to favor an October pause followed by additional monetary tightening before year-end. Traders assign a high probability to no change at the Fed's Oct. 27-28 meeting, while the likelihood of a 25-basis-point increase in December remains around 86%. Thursday's stronger-than-expected jobless claims reinforced the view that the labor market has not weakened enough to force an immediate change in policy, while rising energy prices are intensifying concerns about the inflation outlook. Treasury yields nevertheless declined as renewed selling in technology stocks and escalating Middle East tensions supported demand for government bonds. The benchmark 10-year Treasury yield fell toward the 5.0% area, providing some relief from recent highs, although gold remained under selling pressure. The decline underscores the continuing importance of Fed rate expectations and portfolio positioning relative to traditional safe-haven demand.
The Federal Reserve remains in its premeeting communications blackout, leaving incoming data as the principal influence on interest rate expectations. Thursday's remaining calendar includes the Conference Board's September leading economic index and the Kansas City Fed manufacturing survey. Friday brings preliminary October manufacturing and services purchasing managers' indexes at 9:45 a.m. EDT, followed by the final University of Michigan consumer sentiment survey at 10 a.m. EDT. Next week's Oct. 27-28 Fed meeting and the Oct. 29 personal consumption expenditures inflation report will be major tests of December tightening expectations. Softer activity figures and easing inflation expectations could reduce pressure on Treasury yields and provide support for gold, while resilient employment and persistent cost increases would reinforce expectations for additional monetary tightening.
The Strait of Hormuz and U.S.-Iran situation deteriorated further Thursday following reports of another series of attacks on commercial shipping and continuing threats against U.S. military assets in the region. Iran claimed that seven oil tankers were damaged or caught fire overnight after being struck or encountering naval mines in the waterway, although the full extent of the incidents has not been independently confirmed. Iran's Revolutionary Guard renewed warnings that U.S. bases could be targeted if American forces continue assisting commercial shipping through the strait. Washington has increased its military presence in the region, while diplomatic efforts to resume formal negotiations remain stalled. Tehran continues to offer a conditional reopening of the shipping corridor in exchange for concessions that include ending the U.S. blockade of Iranian ports, but no agreement has been reached. Renewed Houthi attacks against Saudi Arabian infrastructure have added to concerns about regional escalation and the security of alternative energy-export routes.
The latest escalation pushed Brent crude above $112.00 a barrel, its highest level since May, while WTI approached $100.00. The rise in energy prices underscores the continuing risk that renewed disruptions to Gulf shipping could intensify global inflation pressure. For gold, the heightened geopolitical uncertainty supports defensive demand, but the accompanying rise in crude oil prices strengthens the case for restrictive U.S. monetary policy, offsetting some of bullion's safe-haven appeal. Silver has come under greater selling pressure as higher borrowing costs and concerns about industrial activity compound the impact of weakness in gold.
Global risk sentiment deteriorated before the U.S. open, with technology stocks leading declines amid renewed concerns about artificial intelligence investment, financing costs and corporate valuations. U.S. stock index futures pointed to a weaker opening, with Nasdaq futures underperforming after a brief midweek recovery. European equities were also lower as investors assessed elevated energy costs, persistent fiscal uncertainty in France and the prospect of restrictive monetary policy. Asian equity markets weakened, reflecting renewed pressure on technology shares and concerns about the impact of high energy prices on corporate earnings. Government bonds found support as investors reduced exposure to equities, while the combination of falling bond yields and rising crude prices highlighted the competing influences of slowing growth and persistent inflation.
The key outside markets see Nymex WTI crude oil prices higher and trading near $99.95 a barrel, while Brent crude was near $112.41. The yield on the benchmark 10-year U.S. Treasury note is trading near the 5.0% area. The U.S. dollar remains comparatively firm against major currencies, with continuing expectations for restrictive Fed policy limiting the benefit to gold from lower bond yields. (Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.)
Technically, spot gold bulls' next upside price objective is to push prices back above the $4,124.25 to $4,143.48 resistance zone, with a sustained recovery through that area needed to ease near-term selling pressure. Bears' next near-term downside price objective is a break below the $4,079.00 to $4,068.00 support zone, with deeper downside targets at $4,058.00 and then $4,038.00. First resistance is seen at $4,124.25 and then at $4,143.48. First support is seen at $4,079.00 and then at $4,068.00.
Spot silver bulls' next upside price objective is to drive prices back above the $56.920 to $57.390 resistance zone, with a sustained move through that area needed to reverse the recent breakdown. The next downside price objective for the bears is a break below $56.340, with deeper downside targets at $55.410 and then $54.750. First resistance is seen at $56.920 and then at $57.390. Next support is seen at $56.340 and then at $55.410.
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