(Kitco News) – gold prices are lower in early morning US trading on Thursday, hitting daily lows following a US inflation report that came in higher than expected, which in turn pushed US Treasury yields a bit. Since then, however, gold and silver prices have risen sharply from their daily lows. This morning, some profit is being taken again from short-term futures traders. August gold futures last fell $6.00 to $1,888.20 and Comex silver last moved up $0.013 to $28.01 an ounce in July.
The US economic data point of the week saw the May Consumer Price Index report come in at 0.6%, well ahead of the expected 0.5% increase. Year-on-year, the CPI rose to 5.0% in May, from 4.7% in April. Today’s report falls into the camp of those who think inflation may become too high in the coming months. In the short term, gold and silver traders are putting more emphasis on the rise in bond yields following the CPI report, and less on the bullish implications of rising inflation.
The weekly US jobless claims report showed a decline in claims in the last period, which was also seen as a little negative for safe-haven metals.
Global equity markets were mixed overnight, with European equities largely flat and Asian equities mostly firmer. US stock indices are pointing to mixed to weaker openings as the daily session opens in New York. The global market is currently calm, with no major geopolitical flare-ups involved and some typical summer doldrum trading taking place.
What may have flown under the radar screen of many in the market recently is the quiet, steady decline in US Treasury yields, which fell to a more than three-month low this week. The yield on the 10-year US Treasury currently stands at 1.52%. Rising commodity prices and a number of supply shortages, coupled with major economies breaking out of their pandemic shackles, have heightened the specter of rising and potentially problematic price inflation in the coming months. However, the big element that is inconsistent with the steeper inflation theory is that US Treasury yields remain close to historically low levels. The persistently low yields on US bonds support the Federal Reserve’s claims that the upward inflation trajectory is only temporary.
The European Central Bank held its regular monetary policy meeting on Thursday. No change in monetary policy has been announced and no change is expected.
The marketplace will follow the weekend meeting of the Group of Seven countries. A draft of the meeting’s communiqué shows that the group will focus on its collective relations with China and Russia.
Major external markets are seeing the US dollar index firmer today. The price of Nymex crude has risen slightly and is trading around $70.00 a barrel after reaching a 2.5-year high of $70.62 on Wednesday.
Other US economic data to be released on Wednesday include the weekly jobless claims report, real earnings and the Treasury’s monthly budget statement.
Technically, the August gold futures bulls have the solid short-term overall technical advantage amid a nine-week-old price uptrend on the daily bar chart. Bulls next upward price target is to produce a close above solid resistance at the June high of $1,919.20. Bears next down price target in the near term pushes futures prices below solid technical support at $1,850.00. The first resistance is seen at $1,900.00 and then it hits this week’s high at $1,906.90. The first support is seen at the overnight low of $1,871.80 and then at $1,866.70. Wyckoff’s market valuation: 7.0
The silver bulls have the overall short-term technical advantage, but a two-month-old price uptrend on the daily bar chart has stalled. Silver Bulls next upward price target is to close July futures prices above solid technical resistance at the May high of $28.90 an ounce. The next downward price target for the bears is to close prices below solid support at $26.00. The first resistance is seen at this week’s high at $28.145 and then at $28.37. Next support is seen at today’s low of $27,475 and then at $27.31. Wyckoff’s market valuation: 6.5.
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