More price pressure on gold, silver as USDX, bond yields spike up

Gold and silver prices are lower in midday U.S. trading Monday. Gold prices hit a nearly 2.5-year low and silver a more-than-two-week low today. Rising government bond yields and a very strong U.S. dollar index are the main bearish factors pushing the precious metals markets down. October gold was last down $12.70 at $1,632.80 and December silver was down $0.17 at $18.73.

The global marketplace experienced rough waters Monday, in a continuation of keener risk-off trading attitudes seen late last week. U.S. and/or global economic recession worries are rising rapidly. Global stock markets were mostly lower overnight. U.S. stock indexes are mixed at midday but not far above last week's three-month lows. The Wall Street Journal today reported this year has been the worst year since 1930 for a "buy-the-dips" strategy in U.S. stock trading and investing. FOREX volatility and rising government bond yields are in the spotlight Monday.

The U.K.'s big plan to sell more government bonds in an effort to finance better economic growth has helped to prompt a rout in global government bond markets. "The bond vigilantes are back and the British pound is the target," read a Barron's headline today.

Broker SP Angel in an email dispatch this morning said gold saw a "minor flash crash" overnight. "The metal continues to get hammered" by the U.S. dollar. Foreign exchange volatility is rising, with the British pound passing its record low in 1984 and presently trading around $1.04 to the dollar. The Chinese yuan is nearing 2008 lows. "Traders are ramping up short positions on gold, with fund managers more bearish on the metal than any other time over the past four years, according to a Bloomberg report. Rising U.S. Treasury yields have been a major headwind to the gold and silver markets. "Gold ETF outflows continue, with holdings near their 2-year lows," said the broker.

Despite its losses, the gold market continues to outperform most other major assets – WGC

The key outside markets today see Nymex crude oil prices weaker, hitting a seven-month low and trading around $78.00 a barrel. The U.S. dollar index is higher and pushed to another 20-year high today. Meantime, the yield on the 10-year U.S. Treasury note is rising and presently fetching 3.771%. The 2-year Treasury note yield is 4.74%.

Technically, October gold futures prices hit a nearly 2.5-year low today. The gold futures bears have the solid overall near-term technical advantage. Prices are in a six-week-old 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 $1,646.40 and then at $1,652.00. First support is seen at today's low of $1,624.40 and then at $1,615.00. Wyckoff's Market Rating: 1.0

December silver futures prices hit a two-week low today. The silver bears have the firm 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 today's high of $19.045 and then at $19.40. Next support is seen at today's low of $18.435 and then at $18.00. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 375 points at 330.50 cents today. Prices closed near mid-range today and hit a nine-week low. The copper bears have the firm overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 369.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the July low of 315.55 cents. First resistance is seen at 340.00 cents and then at 347.25 cents. First support is seen at 325.00 cents and then at 315.55 cents. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley

Silver caught between an industrial metal and a monetary asset

Silver prices are on the move to the top of their current trading range, looking to test resistance around $22 an ounce. Although the precious metal is supported by long-term fundamentals, commodity analysts at BMO Capital Markets said that growing recessionary risks could weigh on prices in the near term.

While silver is considered a monetary metal, the analysts noted that its role as an industrial metal had been a dominant factor. They added that so far this year, silver has been trading as a risk-on asset, "which does not bode well for prices if economic headwinds mount."

They added that as recessionary pressure build, gold prices will continue to outperform silver.

The analysts noted that investors' preference for gold over silver can be seen in the paper market as demand for gold-backed exchange-traded products has outperformed silver-backed exchange-traded products.

"Despite gold-backed exchange-traded funds (ETFs) seeing net inflows of 225t year to date, owing to multi-decade high inflation, geopolitical tensions, and mounting recessionary fears, silver ETPs have seen net outflows of 269t since the start of the year," the analysts said.

Lukewarm investor interest in silver can also be seen in the physical market. The Canadian bank said that demand for silver bars and coins is expected to rise by 213 million ounces this year, down nearly 24% from last year. However, the analysts also noted that physical demand will remain well above the previous highs hit in 2015.

Looking past the paper and physical market, BMO analysts said that investors should keep an eye on the metal's industrial applications.

However, the analysts also said investors shouldn't ignore silver's long-term fundamental outlook.

"We expect to see silver's longer-term industrial uses, particularly related to the energy transition, to continue to help support near-term investor sentiment," the analysts said. "Industrial silver demand is undergoing its own transition. Industrial demand, including photography, is set to grow by 117Mozpa by 2030, compared to 2021 levels, that is equivalent to the total amount of primary silver expected to be produced by China this year."

Gold hasn't lost its luster even as the Fed continues to raise rates – State Street's George Milling-Stanley

In the green energy transition, BMO said that silver demand within the solar sector will remain an essential factor in the precious metal.

"Even taking into consideration reduced silver intensity per cell, we still forecast PV silver demand to increase 8% to 123Moz by 2030, from 2021 levels, owing to the accelerated buildout of solar generation capacity. In a scenario where there is no further reduction in silver intensity, we would expect PV silver demand to increase to 160Moz by 2030," the analysts said.

The growing electric vehicle market also represents a growing source of demand for silver. BMO sees silver usage in the auto sector growing to 89 million ounces by 2030, up nearly 65% from 2021 levels.

"While we expect the gold:silver ratio in the long term to revert to 70:1, mounting recessionary signals, geopolitical tensions and still searing inflation could see the risk-off environment persisting in the near term, which on balance should favor gold above silver. Ultimately, tightening monetary policy will likely weigh on gold over the medium term, with silver more insulated from price corrections owing to the importance of industrial demand," the analysts said.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

Tim Moseley