Price pressure on gold, silver as government bond yields, USDX soar
Gold and silver prices are solidly lower in early U.S. trading Friday. Gold prices scored another nearly 2.5-year low. Soaring government bond yields and a very strong U.S. dollar index are bearish elements that are punishing the precious metals markets at present. October gold was last down $24.80 at $1,646.50 and December silver was down $0.532 at $19.08.
Global stock markets were mostly lower overnight. U.S. stock indexes are pointed to solidly lower openings and three-month lows when the New York day session begins. Risk aversion remains keen late this week after Russian President Putin earlier this week said he will mobilize more troops to fight his war with Ukraine, and also implied he could use his nuclear weapons if Russia's integrity is threatened. Many pundits are saying Putin has been pushed into a corner and has become an even more dangerous man.
Don't be surprised if gold prices make a solid rebound by the end of today, heading into an uncertain weekend that sees global markets in turmoil and a Russian President who the world views as losing a war with a small country. Gold has a recent history of showing good strength when the going in the marketplace gets really rough.
U.S. and/or global recession worries have increased this week, following downbeat comments on U.S. economic prospects from Federal Reserve Chairman Jerome Powell on Wednesday and as major central banks this week tightened their monetary policies to tamp down surging inflation. In overnight news, the U.K. announced a major tax cut and deficit spending to try to jumpstart its economy. That news helped to spike global government bond yields. Meantime, the Euro zone manufacturing and services purchasing managers indexes dropped in September and are suggesting both sectors are contracting.
'Long, dark period ahead of us' as Putin escalates in Ukraine and the Fed hikes another 75 bps – Art Laffer
The key outside markets today see Nymex crude oil prices solidly lower, hitting a seven-month low and trading around $80.50 a barrel. The U.S. dollar index is solidly higher and pushed to another 20-year high in early U.S. trading. A Barron's headline this morning reads: "The dollar is crushing its rival currencies." It's important to point out that price trends in the currency markets tend to be stronger and longer-lasting than price trends in other markets. Thus, the surge in the greenback may continue to for quite some time. Meantime, the yield on the 10-year U.S. Treasury note is rising and presently fetching 3.771%and at an 11-year high. The 2-year Treasury note yield is 4.205%.
U.S. economic data due for release Friday includes the U.S. flash manufacturing and services purchasing managers indexes.
Technically, the October gold futures bears have the solid overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at the overnight high of $1,674.50 and then at this week's high of $1,687.00. First support is seen at today's low of $1,638.80 and then at $1,625.00. Wyckoff's Market Rating: 1.0
September silver futures bears have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at the overnight high of $19.745 and then at $20.00. Next support is seen at $19.00 and then at $18.77. Wyckoff's Market Rating: 2.5.
By Jim Wyckoff
For Kitco News
Time to buy Gold and Silver on the dips
David