Price declines for gold, silver following hawkish Fed, upbeat U.S. data

(Kitco News, Thurs. Jan. 27th, 2022) – Gold and silver futures prices solidly lower in early U.S. trading Thursday, in the wake of a more-hawkish-than-expected Federal Reserve meeting and following some upbeat U.S. economic data—both of which have helped push the U.S. dollar index to a 1.5-year high today. February gold futures were last down $5.30 at $1,847.10 and March Comex silver was last up $0.079 at $23.975 an ounce.

The just released U.S. four-quarter gross domestic product report showed a rise of 6.9% versus expectations for a rise of 5.5%. The closely watched inflation indicator, the personal consumption expenditures (PCE) index, came in at a hot 6.5% annual rate in the fourth quarter. U.S. weekly jobless claims data was also upbeat. The data helped to rally the U.S. dollar index, which helped to push the gold and silver markets to their daily lows.

Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. The marketplace is still jittery Thursday morning following the conclusion of the Federal Reserve’s Open Market Committee (FOMC) meeting Wednesday afternoon. The FOMC statement did not move markets much, but Fed Chairman Powell’s press conference saw Powell seemingly lean more hawkish than most expected. Powell gave no specific timeframe on upcoming rate increases and said the Fed will be “nimble.” The marketplace wanted more clarity on timing of the rate hikes and did not get it. In fact, Powell’s presser may have made the Fed’s monetary policy even less clear. And markets don’t like uncertainty. Still, many are thinking the Fed will make five interest rate increases within the next year. Fed watchers also think the central bank might start to shrink its balance sheet faster than what had been expected (quantitative tightening). “The Fed seems to be in a hurry now,” said one analyst.

Gold price tumbles $35 as Fed’s Powell says inflation ‘is slightly worse’ than in December, signals March rate hike

Powell’s comment yesterday that the U.S. labor markets conditions are consistent with maximum employment means that the central bank is firmly focused rising inflation. This morning’s core personal consumption expenditures number for the fourth quarter appears to corroborate Powell’s hawkish comments on Wednesday afternoon.

Still on the front-burner of the marketplace is the Russia showdown with Western nations as Russia appears poised to invade Ukraine. NATO allies are sending arms to Ukraine and putting NATO troops on higher alert, including 8,500 U.S. troops. Russian demands on Ukraine not being able to join NATO have been rejected by the U.S. This situation appears to be deteriorating and will likely get worse before it gets better.

The key outside markets today see crude oil prices firmer and trading around $87.50 a barrel after hitting a seven-year high on Wednesday. The U.S. dollar index is solidly higher and hit a 1.5-year high today. The U.S. Treasury 10-year note yield is presently fetching 1.835%–up from earlier this week.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the advance fourth-quarter GDP report, durable goods orders, pending home sales and the Kansas City Fed manufacturing survey.

Technically, the February gold futures bulls have the overall near-term technical advantage but are fading late this week. A five-week-old price uptrend on the daily bar chart is in some jeopardy. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at this week’s high of $1,854.20. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at today’s high of $1,821.40 and then at $1,833.00. First support is seen at $1,800.00 and then at $1,790.00.

March silver futures bulls have the slight overall near-term technical advantage but are fading fast and need to show fresh power soon. A five-week-old uptrend on the daily bar chart is in serious jeopardy. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $24.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $23.50 and then at today’s high of $23.625.

Posted by :

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com