As the latest US inflation report for January came in smoking hot, gold and silver prices are feeling the heat with a slight dip in early US trading on Thursday. At publishing of this commentary, April gold was up $5.60 at $1850.9, while March silver increased $0.143 to $21.715. Brace yourselves, investors, as the US economic data due for release on Thursday includes a ton of hotly anticipated updates, such as the weekly jobless claims report, the producer price index, the Philadelphia Fed business survey, and new residential construction. Not to mention, several Federal Reserve officials are slated to give speeches today.
Despite the technical advantages held by the gold futures bulls, prices are in a fledgling downtrend on the daily bar chart. The bears’ next near-term downside price objective is to push futures prices below solid technical support at $1,800.00, which could spell trouble for the shiny metal. First resistance is seen at Wednesday’s high of $1,870.90, and then at this week’s high of $1,881.60. First support is seen at this week’s low of $1,839.30 and then at $1,830.00. Similarly, the silver bears hold the overall near-term technical advantage, with prices in a fledgling downtrend on the daily bar chart. The silver bulls’ next upside price objective is to close March futures prices above solid technical resistance at $23.00, while the next downside price objective for the bears is to close prices below solid support at $21.00. First resistance is seen at Wednesday’s high of $21.875, and then at this week’s high of $22.085. Next support is seen at this week’s low of $21.41 and then at $21.00.
While global stock markets are mostly higher, US stock indexes are pointing toward a lower opening when the New York day session began. In overnight news, the ongoing tension between China and the US escalated as China blacklisted US companies Lockheed and Raytheon, both major US defense contractors. This move comes after the US blacklisted six Chinese companies linked to the Chinese spy balloons. What does this mean for the market? Only time will tell, but it could lead to some serious turbulence.
The US dollar index is weaker on a corrective pullback from recent good gains that saw the index hit a five-week high on Wednesday. Nymex crude oil futures prices are slightly up, trading around $78.75 a barrel. On the other hand, the yield on the benchmark US 10-year Treasury note is presently fetching a hefty 3.788%, giving traders something to chew on.
Watch out, investors, as gold’s high-convexity allure may be on full display over the next couple of months. With the Federal Reserve taking its benchmark to at least 5.25%, pushing real rates higher, gold is likely to stay tethered around $1,800 an ounce. This could induce short-straddle expressions in the interim. The hotter PPI report falls into the camp of the US monetary policy hawks, who want to see the Fed continue to raise US interest rates to choke off problematic price inflation.
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