Gold price down as Fed officials lean hawkish

(Kitco News) – Gold and silver prices are moderately lower in early trading Wednesday, as the first Federal Reserve officials’ comments are coming out of a key Fed Reserve meeting, and they favor the U.S. monetary policy hawks. October gold futures were last down $7.40 at $1,780.80. September Comex silver was last down $0.065 at $23.71 an ounce.

The highly anticipated annual Federal Reserve symposium being held in Jackson Hole, Wyoming late this week saw Kansas City Fed President Esther George Thursday morning say on CNBC that recent stronger U.S. economic data is cause for the U.S. central bank to begin to discuss tightening its monetary policy—despite the growing concerns about the resurgence of the coronavirus and its potential impact on the U.S. and global economies. George said the virus remains a concern for economic growth but implied recent stronger U.S. economic reports warrant the Fed making plans to reel in easy-money policies presently in place “sooner rather than later.”

Meantime, St. Louis Federal Reserve president James Bullard, in a CNBC interview, echoed George’s assessment that U.S. monetary policy is too loose and needs to be “tapered.” Fed Chair Jerome Powell is slated to speak virtually on Friday. Many traders and investors had believed the Federal Reserve would extend its easy-money policies for a longer period of time than they had planned just a few weeks ago, due to the spreading Covid delta variant. Powell may still feel that way, but Fed officials George and Bullard are leaning hawkish.

The just-released U.S. GDP report for the second quarter showed a 6.6% growth rate versus 6.5% reported in the first GDP estimate for the second quarter. The closely watched PCE price index of the GPD report came in at up 6.5% versus the first estimate of up 6.4%. The Fed’s Bullard on CNBC said the PCE index and price inflation in general is “higher than we’d expected.” The PCE index is just one more indicator that inflation is running too hot.

Global stock markets were mixed to weaker overnight. The U.S. stock indexes are pointed to narrowly mixed openings and not far below this week’s record highs in the S&P 500 and Nasdaq. There is scant risk aversion in the marketplace this week.

Other U.S. economic data due for release Thursday includes the weekly jobless claims report and the Kansas City Fed manufacturing survey.

The key outside markets today see the U.S. dollar index firmer and still trending higher. Nymex crude oil futures prices are weaker and trading around $67.75 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching 1.346%. U.S. bond yields are in the rise this week, hinting that bond traders are at least a bit worried about a hawkish U.S. monetary policy tone coming from the Fed at this week’s Jackson Hole confab.

Technically, October gold futures bulls have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Prices are still in an uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the July high of $1,836.20. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,750.00. First resistance is seen at the overnight high of $1,791.40 and then at $1,800.00. First support is seen at this week’s low of $1,775.90 and then at $1,769.80.

The silver bears have the overall near-term technical advantage. Prices are still in a three-month-old downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing September futures prices above solid technical resistance at $25.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the August low of $22.295. First resistance is seen at $24.00 and then at $24.38. Next support is seen at $23.25 and then at $23.00.

Posted by :

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com