Gold, silver see strong price rebounds on "inflation trade"

(Kitco News) - Gold and silver prices are trading sharply higher in early U.S. trading Friday, following a wild session Thursday, in which the yellow metal’s price was up over $30 at one point and down over $25 at another. It appears metals traders to end the week are focusing on the bullish aspects of “the inflation trade” that has been reignited following Fed Chairman Jerome Powell’s very dovish speech on U.S. monetary policy delivered Thursday morning. October gold futures were last up $37.50 an ounce at $1,962.50. September Comex silverprices were last up $0.74 at $27.765 an ounce.

Global stock markets were mixed overnight. The U.S. stock indexes are also pointed toward mixed weaker openings when the New York day session begins. U.S. stock indexes have had a very good week, with the Nasdaq and S&P hitting record highs and are on track for the best week in two months.

The marketplace is still digesting Powell’s speech on Thursday, in which he outlined the U.S. central bank’s new strategy to loosen its inflation guidelines and focus more on fuller employment. Most market watchers now reckon U.S. interest rates will remain low for a very long time. The shift in Fed policy will mostly likely reignite “the inflation trade,” which has historically been bullish for hard assets like raw commodities. In recent years the prospects for very low inflation and even deflation had muzzled many commodity market prices.

The Japanese yen appreciated versus the greenback Friday on news that Japan Prime Minister Abe is resigning due to health reasons.

The U.S. Republican convention ended Thursday, with the marketplace paying little attention to the event this week.

European shares were weaker Friday as Covid-19 cases are on the rise again in much of Europe.

The important outside markets today see Nymex crude oil prices near steady and trading around $43.00 a barrel. Hurricane Laura lashed Texas and Louisiana and shut in much of the U.S. Gulf coast oil and gas installations. That pushed gasoline futures prices to a five-month high this week. The U.S. dollar index lower and back near its recent two-year low. The yield on the U.S. Treasury 10-year note is trading around 0.75% today. Bond yields have risen this week, amid better trader and investor risk attitudes amid some recent better-than-expected U.S. economic data.

U.S. economic data due for release Friday includes personal income and outlays, advance economic indicators, the ISM Chicago business survey, and the University of Michigan consumer sentiment survey.

Technically, the gold bulls still have the firm overall near-term technical advantage, amid recent choppy trading. Prices are still in an uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in October futures above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at this week’s high of $1,978.50 and then at $2,000.00. First support is seen at the overnight low of $1,921.20 and then at this week’s low of $1,901.40. Wyckoff's Market Rating: 7.5

September silver futures bulls have the solid overall near-term technical advantage. A bullish symmetrical triangle pattern has formed on the daily bar chart. Prices are still in an overall price uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the August high of $29.915 an ounce. The next downside price objective for the bears is closing prices below solid support at the August low of $23.58. First resistance is seen at this week’s high of $28.035 and then at $28.605. Next support is seen at the overnight low of $26.89 and then at $26.095. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com