Gold and Silver see solid falls as US CPI heats even hotter

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(Kitco News) – Gold and silver prices are solidly lower, hitting a three-week low in early U.S. trade on Friday after a problematically high U.S. inflation report suggested bond yields and the U.S. dollar index continued to rise will rise. August gold futures were last down $21.60 to $1,831.80. Comex July silver futures were last down $0.457 to $21.385 an ounce.

A key data point of the week, if not the month, is the just released US CPI report for May, up 8.6 yoy. CPI was expected to rise 8.2% year-on-year after rising 8.3% in April. This latest CPI number is the highest of the young inflation cycle. The CPI data comes ahead of the Federal Reserve’s FOMC monetary policy meeting next week. The hot CPI suggests the Fed will continue its aggressive pace of tightening US monetary policy. US Treasury Secretary Janet Yellen told Congress this week that Americans should expect an extended period of high inflation. Many market observers fear the US economy could slip into recession or experience a period of dreaded “stagflation” – meaning that economic growth has stalled amid high inflation.

Global equity markets were mostly lower overnight. US stock indexes point to firmer opens as the New York session begins. Risk appetite is impacted this last trading day of the week as China just can’t seem to get past Covid 19. The major Chinese city of Shanghai has reportedly re-imposed new Covid restrictions, having recently lifted some.

China reported consumer inflation of just 2.1% yoy in May. China’s producer price index rose 6.4% in May. Meanwhile, China’s exports rose 16.9% yoy in May, double the market expectations. Imports increased by 4.1% in May.

Major outside markets see Nymex crude prices higher today, trading around $122.50 a barrel. The US Dollar Index is higher in early trade. The yield on the 10-year US Treasury is 3.06%.

Other US economic data due for release on Friday includes the University of Michigan consumer sentiment survey and the Treasury Department’s monthly budget statement.

Technically, the August gold futures bears have the short-term overall technical advantage. The bulls’ next upside target is to close the June futures above solid resistance at the June high of $1,878.60. Bears’ next short-term downside target is to push futures prices below the solid technical support at $1,800.00. Initial resistance is seen at the overnight high of $1,851.00 and then this week’s high of $1,862.40. Initial support is seen at the June low of $1,830.20 and then $1,815.00. Wyckoff’s market rating: 3.5

July silver futures bears have the firm overall short-term technical advantage. An upward price trend on the daily chart has been negated. The silver bulls’ next upside target is a close above the solid technical resistance at $23.00 an ounce. The next downside target for the bears is a close below the solid support at the May low of $20.42. Initial resistance is seen at the overnight high of $21.76 and then $22.00. The next support is at $21.00 and then $20.75. Wyckoff’s market rating: 2.5.