Gold and silver fall back as USDX, bond yields rise at mid-week

 New York (May 12)  Gold and silver prices are solidly lower and near their daily lows in midday U.S. trading Wednesday. A higher-than-expected U.S. inflation reading that prompted a rally in the U.S. dollar index and a rise in U.S. Treasury yields helped to knock down the metals prices at mid-week. Also, some routine profit taking was featured by the shorter-term futures traders after both metals hit multi-week highs earlier this week. June gold futures were last down $16.60 at $1,819.15 and July Comex silver was last down $0.392 at $27.27 an ounce.

Today's 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 right after the report's release, and then rallied, only to sell off when the USDX and bond yields pushed higher. The “reflation trade” remains on the front burner of marketplace chatter.

Ironically, the metals markets one again have seen a bearish 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. It's also perplexing to the metals market bulls that the U.S. stock market is in a sharp sell off at midday today, which is not helping out the safe-haven metals and competing asset class. This occurrence whereby the metals and stock market both sell off has not been infrequent in recent months.

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 $66.10 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 1.69%.

Technically, June gold futures bulls still have the overall near-term technical advantage. A six-week-old price uptrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at $1,836.00 and then at this week's high of $1,846.30. First support is seen at this week's low of $1,817.80 and then at $1,810.00.

KitcoNews