Gold and silver see price declines as U.S. bond yields spike up

 New York (Feb 11)  Gold and silver futures prices are lower in early U.S. trading Friday, in the aftermath of key U.S. inflation data that ran hot and at a 40-year high, and in turn pushed U.S. Treasury yields sharply up. April gold futures were last down $6.70 at $1,830.60 and March Comex silver was last down $0.572 at $22.955 an ounce.

Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. Traders and investors are still digesting Thursday’s consumer price index report for January that came in hot at up 7.5%, year-on-year. That data fell 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, with the 10-year U.S. Treasury note now yielding 2.003%, which is the highest in over two years. Rising bond yields are generally bearish for the safe-haven metals, which have no dividend. However, rising inflation is bullish for hard assets like the metals.

Federal Reserve Bank of St. Louis President James Bullard said he supports raising interest rates by a full percentage point by the start of July — including the first half-point hike since 2000 — in response to the hottest inflation in four decades. However, some other top Fed officials appear skeptical of a half-point hike, suggesting little need to start a hiking cycle with an aggressive move.

Goldman Sachs economists now expect the Federal Reserve to raise interest rates seven times this year to contain surging U.S. inflation, up from the five hikes they had seen earlier.

Meantime, the Kremlin is tightening its military vise on Ukraine, as thousands of Russian troops Thursday began 10 days of exercises in Belarus. Ukraine also warned of upcoming Russian naval drills so extensive that they would block shipping lanes. Aside from Belarus, satellite images revealed deployments of Russian military equipment and troops in Crimea and western Russia, according to the New York Times.

The key outside markets today see crude oil prices higher and trading around $91.25 a barrel. The U.S. dollar index is higher early today.  

U.S. economic data due for release Friday is light and includes the University of Michigan consumer sentiment survey.

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 this week’s high of $1,843.30 and then at $1,850.00. First support is seen at the overnight low of $1,821.10 and then at $1,816.00.

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