Gold, silver sell off on profit taking; US PPI now in focus

(Kitco News) - Gold and silver prices are lower at midday Wednesday and have erased the modest gains seen in the immediate aftermath of a U.S. inflation report that was close to market expectations. Profit taking from the speculative futures traders is featured in both markets. June gold was last down $11.00 at $2,031.90 and July silver was down $0.343 at $25.555.

The U.S. data point of the week saw the April consumer price index come in at up 0.4% from March and up 4.9%, year-on-year. The CPI was expected to come in at up 0.4% from March and up 5.0%, year-on-year. CPI in March was up 5.0%, year-on-year. The April core CPI (excluding food and energy) was up 0.4% from March and up 5.5%, year-on-year, versus the forecast of up 5.5% and compares to up 5.6% in the March report. In the immediate aftermath of the CPI report the marketplace breathed a sigh of relief the inflation numbers did not come in hotter than expected. However, after digesting the data, overall, traders and investors reckoned the CPI data is a wash and probably does not alter the Federal Reserve's trajectory of its monetary policy. The marketplace is now focused on Thursday morning's U.S. producer price index report.

Global stock markets were mixed to weaker overnight. U.S. stock indexes are mixed at midday.

President Biden on Tuesday afternoon met with House Speaker Kevin McCarthy and other congressional leaders to discuss raising or suspending the U.S. debt ceiling. No agreement was reached but the lawmakers and the president will meet again Friday. U.S. Treasury Secretary Janet Yellen recently said the U.S. government could run out of money by June 1 if the debt ceiling is not raised. As the month of May winds down and if no U.S. debt extension is agreed upon, general marketplace anxiety will ratchet up.

In other news, China is expanding its gold reserves and may be abandoning the U.S. dollar. Nigel Green of deVere Group says such may be occurring after news that China's gold reserves increased by 8.09 tons in April. Total gold stockpiles in China reached 2,076 tons after that nation added 120 tons in the five months through March. "Historically, China has been a major buyer of U.S. Treasuries, but this has seen a marked cooling off as Beijing swaps them out in favor of gold."

Green said this strategic move will limit China's dependence on the U.S. dollar, as trade and political relations with the U.S. deteriorate. "Buying gold rather than dollars may also signal moves by China that it is eventually seeking to replace the U.S. dollar as the world's reserve currency. Building stocks of the precious metal and allowing the Chinese yuan to be traded freely would weaken the U.S. dollar's dominance as the global reserve currency."

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil prices are weaker and trading around $73.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.462% and dipped a bit after the CPI report.

Technically, June gold futures bulls still have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the record high of $2,085.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,980.00. First resistance is seen at today's high of $2,056.00 and then at $2,063.40. First support is seen at this week's low of $2,022.00 and then at $2,007.00. Wyckoff's Market Rating: 7.5

July silver futures prices were scoring a bearish "outside day" down. The silver bulls have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $27.00. The next downside price objective for the bears is closing prices below solid support at $24.00. First resistance is seen at $26.00 and then at the April high of $26.435. Next support is seen at today's low of $25.455 and then at $25.25. Wyckoff's Market Rating: 7.5.

July N.Y. copper closed down 710 points at 383.05 cents today. Prices closed near the session low. The copper bears have the overall near-term technical advantage. Prices are in a three-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 408.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the January low of 372.45 cents. First resistance is seen at 390.00 cents and then at this week's high of 395.95 cents. First support is seen at the April low of 381.65 cents and then at 380.00 cents. Wyckoff's Market Rating: 4.0.

By

Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com