Gold and silver see price pauses, post Fed rate hike

NEW YORK (June 16)  Gold and silver prices are not far from unchanged in early U.S. trading Thursday. The metals traders are digesting the latest moves by major central banks, including a Federal Reserve rate hike Wednesday afternoon. August gold futures were last up $1.30 at $1,820.90. July Comex silver futures were last down $0.055 at $21.365 an ounce.

Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward solidly lower openings and at or near new for-the-move and contract lows when the New York day session begins. Risk averse is keen late this week, following the Federal Reserve’s aggressive 0.75% Fed funds rate hike on Wednesday afternoon that heightened U.S. recession fears. Reported Bloomberg today: “Soaring prices are hurting Americans, and the cure is going to hurt, too. It may take a recession to stamp out inflation, and it’s likely to happen on President Joe Biden’s watch. According to estimates by Bloomberg Economics, a downturn by the start of 2024 is now close to a three-in-four probability, which is bad news for Biden if he wants a second term.”

The Bank of England has just raised its key interest rate by 0.25%. The move was not unexpected. The European Central Bank held an emergency meeting Wednesday, but not much came out of it as far as the marketplace was concerned.

Another worrisome element in the financial markets is the plunging value of the Japanese yen against the U.S. dollar. The yen has lost around one-third of its value against the dollar the past 1.5 years as the Bank of Japan keeps its monetary policy easy, while other major central banks tighten. A Barrons headline today reads: “The yen’s weakness is another sign that something isn’t right in the global economy.”

All of the above are working to limit the downside for the safe-haven metals. However, the gold and silver bulls are a bit frustrated their metals have not rallied more. History shows that problematic price inflation is bullish for hard assets and bearish for paper assets.

The key outside markets today see Nymex crude oil prices lower and trading around $114.25 a barrel. The U.S. dollar index is a bit lower in early trading. The yield on the 10-year U.S. Treasury note is fetching 3.37%.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey and new residential construction.

Technically, the August gold futures bears have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at this week’s high of $1,882.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at the overnight high of $1,838.70 and then at Wednesday’s high of $1,845.40. First support is seen at this week’s low of $1,806.10 and then at $1,800.00. Wyckoff's Market Rating: 3.0

July silver futures bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the June high of $22.565 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at the overnight high of $21.76 and then at $22.00. Next support is seen at $21.00 and then at this week’s low of $20.845.

KITCO