Gold, silver getting hammered by rising bond yields, strong greenback
Gold and silver prices are solidly lower in midday U.S. trading Wednesday, with December gold futures notching a 6.5-month low and dropping below psychological support at $1,900.00. An up-trending U.S. dollar index that hit a 10-month high overnight and a 10-year U.S. Treasury note yield that scored a 16-year high this week are bearish outside market elements for the two precious metals. December gold was last down $23.40 at $1,896.40 and December silver was down $0.381 at $22.815.
A still-hawkish Fed continues to squelch the metals market bulls. Today in my weekly “Front Burner" email report I mentioned respected JP Morgan CEO Jamie Dimon recently said the marketplace needs to be prepared for a 7% Fed funds rate in the coming months. The Federal Reserve's FOMC last week held the Fed funds rate steady, at a range of 5.25% and 5.50%. The present consensus of the marketplace is one more 0.25% rate increase, or maybe no more rate hikes at all. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%," Dimon said in an interview with the Times of India. Dimon added he is worried about stagflation setting in, whereby interest rates rise but economic growth stagnates. The JP Morgan chief is presently on the marketplace fringes in his thinking about much higher interest rates. However, I'm generally in Dimon's camp. Although the Fed funds rate may not reach 7% next year, I think the Federal Reserve remains stubbornly hawkish on U.S. monetary policy, which means there is a good chance for a 6% Fed funds rate or a bit more in 2024. That's a bearish scenario for the metals. (If you have not read today's Front Burner report, email me at jim@jimwyckoff.com and I'll forward that report to you. Just put “Front Burner" in the subject line. In today's report I provided forecasts for major markets' price action in the coming months.)
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U.S. stock indexes are lower and hit multi-month lows today. Risk appetite is still dented at mid-week, as a likely U.S. government shutdown this weekend is weighing on marketplace sentiment.
The key outside markets today see the U.S. dollar index higher and hit 10-month high. Nymex crude oil prices are sharply higher, hit a 13-month high and trading around $93.75 a barrel. A Wall Street Journal headline today reads: “Quiet Western drills set stage for $100 oil." Meantime, the benchmark U.S. Treasury 10-year note yield is presently near this week's multi-year high and fetching 4.587%.
Technically, December gold futures prices hit a 6.5-month low today. Bears have the solid overall near-term technical advantage and gained more power today. A five-month-old downtrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,913.60 and then at today's high of $1,921.70. First support is seen at the February low of $1,883.80 and then at $1,875.00. Wyckoff's Market Rating: 2.0.
December silver futures bears have the overall near-term technical advantage. However, there are solid technical support levels just below the market that begin to suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at today's high of $23.12 and then at $23.39. Next support is seen at today's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0.
December N.Y. copper closed down 115 points at 363.75 cents today. Prices closed near mid-range and closed at a four-month low close today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, seven-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 380.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 358.60 cents. First resistance is seen at Tuesday's high of 368.35 cents and then at this week's high of 370.55 cents. First support is seen at this week's low of 362.75 cents and then at 360.00 cents. Wyckoff's Market Rating: 2.0.
By
Jim Wyckoff
For Kitco News
Tim Moseley