Gold, Silver See Strong Price Declines Amid Another Hot U.S. Inflation Report

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Gold prices are solidly down and hit an 11-month low in early U.S. trading Thursday, while silver prices are also sharply lower and notched a two-year low overnight. The U.S. today got another inflation report that ran hot, further suggesting the Federal Reserve will keep its foot on the gas on aggressively tightening U.S. monetary policy. August gold futures were last down $24.20 at $1,711.20. September Comex silver futures were last down $0.714 at $18.49 an ounce.

On tap today was the U.S. producer price index report for June, which came in hot at up 1.1% from May and up 11.1%, year-on-year. The figure was expected to see a monthly rise of 0.8% following May’s reading of up 0.8% from April. Markets showed little reaction to the data, after Wednesday’s CPI report that showed about the same results—problematic price inflation.

Rising bond yields, a strong U.S. dollar index and falling crude oil prices are all bearish elements working against the metals market bulls at present. Recession fears and the resulting reduced consumer and commercial demand for metals are also squelching the bulls.

Global stock markets were mostly down overnight. U.S. stock indexes are pointed toward lower openings when the New York day session beings. Trader and investor risk aversion is keener late this week, following Wednesday’s U.S. consumer price index report that ran hotter than expected at up 9.1% in June, year-on-year, and at a 41-year high.

A feature in the marketplace for some time has been the strong appreciation of the U.S. dollar against other major currencies. Today, the U.S. dollar index, which is a basket of six major currencies weighted against the greenback, hit another 20-year high. The significant interest rate differentials in major economies, with the U.S. rates being higher, is prompting the so-called “carry trade” to be prominent, whereby international traders and institutions swap out their own currencies in favor of owning the U.S. dollar. History suggests this phenomenon can remain in place for quite some time, only making the greenback stronger.

The other feature is this week’s big downdraft in crude oil futures prices, with Nymex futures overnight falling to a three-month low of $93.24 a barrel. January crude oil futures are now trading at $84 a barrel, suggesting the marketplace thinks crude prices will continue to decline in the coming months. Crude’s plunge has pulled other major commodity market prices down, too. The weakening raw commodity sector is one significant early clue that inflationary pressures have peaked.

The key outside markets today see Nymex crude oil prices lower and trading around $94.50 a barrel. The U.S. dollar index is higher and hit a 20-year high following the hot CPI report Wednesday. The yield on the 10-year U.S. Treasury note is fetching 2.982%. The 2-year/10-year Treasury note yield curve remains inverted and at its most inverted in 22 years. Such is a clue of impending U.S. economic recession.

Other U.S. economic data due for release Thursday includes the weekly jobless claims report.

Technically, the August gold futures bears have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $1,750.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at $1,725.00 and then at today’s high of $1,734.80. First support is seen at $1,700.00 and then at $1,685.00. Wyckoff’s Market Rating: 1.0

September silver futures bears have the solid overall near-term technical advantage as prices hit a two-year low overnight. Silver bulls’ next upside price objective is closing prices above solid technical resistance at this week’s high of…

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