Gold sells off as FOMC statement deemed hawkish

(Kitco News) - Gold prices are solidly lower and hit daily lows and a four-week low in afternoon U.S. trading Wednesday, on a bearish reaction to the just-released statement from the Federal Reserve’s Open Market Committee (FOMC) that was deemed hawkish on U.S. monetary policy. August gold futures were last down $20.60 at $1,834.60 and July Comex silver was last down $0.263 at $27.445 an ounce.

The U.S. data point of the week saw the Federal Reserve’s FOMC statement leave U.S. monetary policy unchanged, as expected. However, some FOMC members are now leaning toward raising interest rates sooner than they reckoned earlier this year. Thirteen of 18 Fed officials now see rates rising in late 2023, up from seven in the March meeting who saw rates rising in 2023. A stronger-rebounding U.S. economy and the receding pandemic prompted the shift of more FOMC members favoring a rate hike in 2023. On the inflation front, the Fed says prices are rising but still not at a problematic rate. The Fed sees inflation in 2021 at 3.4% annually, up a full 1% from the 2.4% estimate forecast earlier this year. The statement is being deemed a bit hawkish and now the marketplace awaits Fed Chairman Jerome Powell’s press conference, set to begin shortly, as of this writing.

U.S. stock indexes also sold off on the FOMC statement. Record highs were scored this week in the S&P 500 and Nasdaq stock index futures. The past several weeks have seen little risk aversion in the marketplace and that’s bullish for the global stock markets.  

Reports at mid-week say China is set to try to control inflated raw commodity prices. The government will intervene after copper, iron ore and coal prices rose to record highs recently. The state-owned Assets Supervision and Administration Commission (Sasac) ordered China’s businesses to control risks and limit their exposure to overseas commodity markets. Companies have been ordered to report their futures positions for Sasac. China also said its National Food and Strategic Reserves Administration will soon release stockpiles of metals including copper, aluminum and zinc. The metals will reportedly be sold directly to manufacturers. Copper futures prices have sold off sharply on the news.

The key outside markets today see the U.S. dollar index solidly up following the FOMC statement. Nymex crude oil prices are down a bit and trading around $72.00 a barrel after hitting another 2.5-year high of $72.83 overnight. The key U.S. Treasury 10-year note yield is fetching 1.546%.

Technically, August gold futures bulls still have the overall near-term technical advantage but are fading. A nine-week-old price uptrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,810.70. First resistance is seen at $1,850.00 and then at today’s high of $1,866.00. First support is seen at $1,825.00 and then at $1,810.70. Wyckoff's Market Rating: 6.0

The silver bulls have the overall near-term technical advantage but trading has turned sideways and choppy recently. Silver bulls' next upside price objective is closing July futures prices above solid technical resistance at the May high of $28.90 an ounce. The next downside price objective for the bears is closing prices below solid support at $27.00. First resistance is seen at this week’s high of $28.16 and then at last week’s high of $28.445. Next support is seen at the June low of $27.09 and then at $27.00. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com