Gold, silver catching bids on inflation worries

(Kitco News, Thurs. Feb. 10th, 2022) – Gold and silver futures prices are firmer in midday U.S. trading Thursday, in the aftermath of key U.S. inflation data that ran hot and at a 40-year high. The key outside markets are also in bullish daily postures for the precious metals markets at midday—a lower U.S. dollar index and higher crude oil prices. April gold futures were last up $3.50 at $1,840.10 and March Comex silver was last up $0.32 at $23.66 an ounce.

The U.S. data point of the week was Thursday morning’s consumer price index report for January, which came in at up 7.5%, year-on-year. The marketplace expected CPI to be up 7.2%. This report is the hottest U.S. inflation reading since 1982. This data falls into the camp of the U.S. monetary policy hawks, who want to see an aggressive pace of Federal Reserve interest rate increases this year. U.S. Treasury yields spiked higher after the report, which did pressure the metals markets initially after the report. History shows that rising and problematic price inflation is bullish for the metals markets.

Global stock markets were mixed overnight. U.S. stock indexes are weaker at midday.

In overnight news, the European Union is expecting Euro zone inflation to be up 3.5% in 2022 and up 1.7% in 2023. Given recent inflation data it appears EU economic officials are well behind the curve on recognizing the present pace of inflation.

Gold price remains down as annual U.S. CPI rises 7.5% in January; another 40-year high

Bloomberg this week interviewed a Goldman Sachs analyst, Jeff Currie, who pointed out major raw commodity futures markets are presently seeing the most “backwardation” since 1997—19 out of 28 markets. Backwardation means nearby futures trading at a premium to the deferred contracts. Usually, deferred futures are higher-priced, due to a “carry” premium. Backwardation suggests strong near-term demand for the commodity. “We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it we’re out of it,” said Currie. Futures curves are pricing in shortages, the likes of which not seen in 30 years, he added. Crude oil prices are leading the raw commodity price surge. Thus, crude will be a very important market for metals traders to monitor in the coming months.

The key outside markets today see crude oil prices solidly higher and trading around $91.50 a barrel. The U.S. dollar index is lower at midday today. The U.S. Treasury 10-year note yield is presently fetching 1.994%–the highest in over two years.

Technically, the April gold futures bulls have the overall near-term technical advantage and are having a good week. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the January high of $1,856.70. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the January low of $1,780.60. First resistance is seen at the overnight high of $1,837.30 and then at $1,850.00. First support is seen at Tuesday’s low of $1,816.00 and then at this week’s low of $1,807.50.

March silver futures bulls and bears are back on a level overall near-term technical playing field. However, the bulls are having a good week and have momentum on their side. Silver bulls’ next upside price objective is closing 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 $22.00. First resistance is seen at $24.00 and then at $24.25.