Price pressure on gold, silver, after hot U.S. PPI data

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(Kitco News) -Gold and silver prices are solidly lower in early U.S. trading Friday, extending overnight losses in the wake of a hotter-than-expected U.S. producer price index report for March that boosted the U.S. dollar index and pushed up U.S. Treasury bond yields. June gold futures were last down $26.60 at $1,731.60 and May Comex silver was last down $0.55 at $25.03 an ounce.

The just released March PPI report came in at up 1.0%, versus expectations for a rise of 0.4%. The data, by itself, really does not suggest problematic price inflation is just around the corner, but the 1.0% rise was double the 0.5% increase in February. Also, the report when combined with the recent trajectory of bond yields, does arguably suggest some significant price inflation could occur down the road.

Global stock markets were mixed overnight. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. Risk appetite remains generally keener at present, with no major geopolitical flare-ups spooking the marketplace.

A feature this week has been Wednesday’s minutes of the last Federal Reserve Open Market Committee (FOMC) meeting that took place in March, which saw the Fed reiterating it will keep its monetary policy very accommodative for some time to come. Wharton professor Jeremey Siegel on Thursday said Federal Reserve Chairman Jerome Powell is the most dovish Fed chair ever. In Powell’s defense, how many other Fed chiefs have had to deal with a pandemic that severely crippled the U.S. and the global economies, and still has both hobbled. Said a Bloomberg email dispatch this morning: “The reason why “don’t fight the Fed’ has been such a popular mantra for decades is that it prevents investors from losing lots of money. Even with that rich history, bond traders staged a mini-coup this year and priced in a far more aggressive path of Fed hikes than policy makers have indicated. Now it seems those intrepid traders are starting to capitulate. Treasuries have rallied in a big way this week, with five- and seven-year notes absorbing the bulk of that demand, suggesting that bets on Fed hikes are starting to be pared back.” Still, this 35-plus year market watcher thinks the inflation genie is out of the bottle (Ask anyone building or remodeling a home or business about material costs.) and that bond yields will have to continue to rise in the coming months, along with interest rates. China’s stock market was pressured Friday on a higher-than-expected inflation report. Some analysts reckon any spread of problematic global inflation will originate in China.

There was more civil unrest and rioting in Northern Ireland Friday, which the marketplace is continuing to monitor. Not a major market issue yet, but many believe the situation could get worse as the U.K. tries to figure out what to do with the rules of the region, post-Brexit.

The key outside markets today see the U.S. dollar index firmer on a bounce after solid selling pressure seen much of this week. Nymex crude oil prices are slightly up and trading around $59.75 a barrel. Meantime, the yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.66%.

Other U.S. economic data due for release Friday includes monthly wholesale trade.

Technically, the June gold futures bears have the firm overall near-term technical advantage. However, a price downtrend on the daily chart has stalled out and more price gains in the near term would confirm a bullish double-bottom reversal pattern that would be another chart clue that a market bottom is in place. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at $1,750.00 and then at this week’s high of $1,759.40. First support is seen at $1,730.00 and then at this week’s low of $1,721.60. Wyckoff’s Market Rating: 3.5

May silver futures bears have the overall near-term technical advantage. Prices are in a nine-week-old downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $26.74 an ounce. The next downside price objective for the bears is closing prices below solid support at the March low of $23.74. First resistance is seen at this week’s high of $25.675 and then at $26.00. Next support is seen at $25.00 and then at this week’s low of $24.66. Wyckoff’s Market Rating: 3.5.