Gold, Silver Post Sharp Gains On Inflation News

(June 12, 2024 - Jim Wyckoff)

(Kitco News) - Gold and silver prices are solidly higher in midday U.S. trading Wednesday, following a U.S. inflation report that came in tame and in turn sunk the U.S. dollar index and U.S. Treasury yields. Now, precious metals trades are bracing for this afternoon’s FOMC meeting conclusion. August gold was last up $25.00 at $2,351.80. July silver was last up $0.974 at $30.21.

The U.S. consumer price index report for May, out Wednesday morning, came in at unchanged, month-on-month and up 3.3%, year-on-year. Monthly CPI was seen up 0.1% and up 3.4%, annually. The core CPI (excluding food and energy) for May was up 0.2%, month-on-month and up 3.4%, annually. Both core numbers were also slightly lower than expected. This CPI report falls into the camp of the U.S. monetary policy doves, who want to see the Federal Reserve cut interest rates sooner rather than later.

The benchmark 10-year U.S. Treasury note yield is presently at 4.256%--well down from the 4.40 reading just before the CPI print.

Precious metals traders are reckoning the tamer CPI will indeed allow the Federal Reserve to cut interest rates later this year. And if the Fed starts to ease its monetary policy, the other major central banks of the world are likely to follow. The European Central Bank last week began what could be a process of major central banks easing their money policies over the coming months, or longer. Easier monetary policies suggest more upbeat consumer spending attitudes amid lower borrowing costs. That scenario would mean better global demand for raw commodities, including the metals.

Traders and investors await the results of the Federal Open Market Committee (FOMC) meeting of the Federal Reserve that ends Wednesday afternoon with a statement and press conference from Fed Chairman Jerome Powell. No changes in U.S. monetary policy are expected at this week’s meeting but as always the rhetoric coming from the Fed will be parsed by the marketplace. Don’t be surprised to see the FOMC and Powell take today’s tamer CPI data as an opportunity to lean less hawkish on U.S. money policy. It could also be that today’s CPI report will usurp the FOMC statement and Powell press conference, regarding market significance.

The other key outside market today sees Nymex crude oil prices a bit higher and trading around $78.25 a barrel.

Technically, August gold bulls have gained the slight overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at last week’s high of $2,406.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $2,308.70. First resistance is seen at $2,375.00 and then at $2,400.00. First support is seen at the overnight low of $2,327.20 and then at Tuesday’s low of $2,314.50. Wyckoff's Market Rating: 5.5.

July silver futures bulls have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the May high of $32.75. The next downside price objective for the bears is closing prices below solid support at $28.00. First resistance is seen at today’s high of $30.355 and then at $31.00. Next support is seen at $29.50 and then at this week’s low of $29.135. Wyckoff's Market Rating: 6.5.