Gold, silver see solid gains on safe-haven buying amid nervous marketplace

(Kitco News) - Gold and silver prices are posting sharp gains in midday U.S. trading Thursday. Safe-haven demand and bargain hunting are featured as marketplace anxiety has upticked, following this week’s moves by major central banks, including a Federal Reserve interest rate hike Wednesday afternoon. A sharp sell off in the U.S. dollar index today is also benefitting the metals market bulls. August gold futures were last up $31.50 at $1,851.10. July Comex silver futures were last up $0.445 at $21.86 an ounce.

U.S. stock indexes are sharply lower at midday and hit new for-the-move and contract lows. Risk aversion 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 also just raised its key interest rate by 0.25% and said more hikes are to come. Today’s move by the BOE 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 lift the safe-haven metals. 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 near steady and trading around $115.50 a barrel. The U.S. dollar index is sharply lower at midday. The yield on the 10-year U.S. Treasury note is fetching around 3.3%.

Technically, the August gold futures bears still 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 $1,878.60 and then at $1,882.50. First support is seen at $1,825.00 and then at today’s low of $1,816.30. Wyckoff's Market Rating: 3.0

July silver futures bears have the firm 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 $22.00 and then at the June high of $22.565. Next support is seen at today’s low of $21.32 and then at $21.00. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com