Gold Sees Initial Price Pressure After Hot U.S. CPI, Then Rebounds

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May 12, 2021 10:26 NY TimeKitco 10AM Silver Fix

(Kitco News, Wed. May 12th, 2021) – Gold prices are modestly higher in early morning U.S. trading Wednesday, after selling off briefly following a higher-than-expected U.S. inflation reading. A rebound in the U.S. dollar index at mid-week is also a negative for the metals markets. June gold futures were last up $2.60 at $1,838.70 and July Comex silver was last down $0.082 at $27.58 an ounce. 

The just-released U.S. consumer price index for April showed a hotter-than-expected rise of 0.8% from March and up 4.2%, year-on-year. Those are the largest numbers since 2008. Forecasts called for April CPI to be up 0.2% from March and up 3.6%, year-on-year. The gold and silver markets prices blipped down a bit but then quickly recovered to trade just slightly lower. The “reflation trade” remains on the front burner of marketplace chatter.

Ironically, the metals markets one again have seen a bearish initial reaction to hotter inflation data, as traders focused on the tighter monetary policy implications of higher consumer prices and higher interest rates. Yet, on a longer-term basis history shows the precious metals markets are hard assets that come into more favor for traders/investors during periods of higher and even problematic price inflation.

Global stock markets were mixed overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. Some market analysts are blaming worries about problematic inflation for this week’s pullback in stock markets. 

In overnight news, the European Union forecast its annual gross domestic product growth at 4.3% in 2021, up from its last estimate of 3.8% growth. The EU sees annual inflation in 2021 at 1.7%, and at 1.3% in 2022. These low inflation numbers point to lame price rises over the next two years, which contradict some of the recent indications that price inflation is heating up much more rapidly.

The marketplace is keeping a wary eye on the flare-up in the Middle East, as Israel and Hamas are stepping up their missile strikes against each other. The military action between the two is the most intense since 2014.

The key outside markets today see the U.S. dollar index solidly up on a corrective bounce after prices Tuesday hit a 2.5-month low. Meantime, Nymex crude oil prices are higher and trading around $66.00 a barrel. The U.S. Colonial pipeline system that has been shut down due to a cyberattack is set to reopen temporarily. The yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.64%. 

Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, real earnings, the monthly Treasury budget statement and the weekly DOE liquid energy stocks report.

Technically, June gold futures bulls have the firm overall near-term technical advantage amid a six-week-old price uptrend in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,881.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at this week’s high of $1,846.30 and then at $1,850.00. First support is seen at this week’s low of $1,817.80 and then at $1,800.00.

The silver bulls have the firm overall near-term technical advantage amid a six-week-old price uptrend in place on the daily bar chart. Silver bulls’ next upside price objective is closing July futures prices above solid technical resistance at $29.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $26.00. First resistance is seen at the overnight high of $27.775 and then at this week’s high of $28.005. Next support is seen at this week’s low of $27.18 and then at $27.00. 
Posted by :

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com