Gold Hits 3-Week Low On Hawkish Fed, Bearish Outside Markets

(Kitco News) – Gold prices are solidly lower and hit a three-week low in early U.S. trading Thursday, in the wake of the latest FOMC meeting that saw a U.S. interest rate increase. The important “outside markets” are also bearish for the precious metals today, as the U.S. dollar index is higher and crude oil prices are lower. August Comex gold was last down $18.20 an ounce at $1,257.70. July Comex silverwas last down $0.391 at $16.745 an ounce.

The news reports late Wednesday that special prosecutor Robert Mueller will investigate U.S. President Donald Trump for obstruction of justice has thrown more uncertainty into the world marketplace. However, this development is not yet providing any support to safe-haven gold.

The Federal Reserve on Wednesday afternoon raised U.S. interest rates by 0.25%, as expected by most. The Fed said it will also fairly aggressively reduce its big balance sheet of government securities in the coming months. The FOMC statement also said U.S. inflationary pressures have eased a bit recently. However, Fed Chair Janet Yellen at her press conference sounded a more hawkish tone on inflation. After digesting the FOMC statement and Yellen’s remarks, the marketplace deemed this latest Fed meeting as more hawkish on U.S. monetary policy.

The gold market started to erode right after the FOMC statement early Wednesday afternoon, and continued to slide into the late afternoon after-hours U.S. trading.

The Bank of England held its monetary policy meeting Thursday and left interest rates unchanged. The Bank of Japan also held its regular monetary policy meeting Thursday. The Swiss National Bank left its monetary policy unchanged at its meeting. The Hong Kong Monetary Authority raised its key interest rate by 0.25% on Thursday.

The key “outside markets” on Thursday morning see Nymex crude oil futures prices weaker following another bearish weekly U.S. energy stocks report Wednesday. The oil market bears have the solid overall near-term technical advantage as prices trade well below $50.00 a barrel. Meantime, the U.S. dollar index is solidly higher and is supported on the more hawkish Fed tone on U.S. monetary policy. The greenback bears still hold the overall near-term technical advantage.

U.S. economic data due for release Thursday includes the weekly jobless claims report, import and export prices, the Empire State manufacturing survey, the Philadelphia Fed business survey, industrial production and capacity utilization, the NAHB housing market index, and Treasury international capital data.

(Note: Follow me on Twitter–@jimwyckoff–for breaking market news.)

Live 24 hours gold chart [Kitco Inc.]

Technically, August gold futures bulls still have the slight overall near-term technical advantage but are fading badly and need to show fresh power soon. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,284.20. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at $1,225.00. First resistance is seen at $1,260.00 and then at today’s high of $1,268.50. First support is seen at the overnight low of $1,255.00 and then at $1,250.00. Wyckoff’s Market Rating: 5.5

Live 24 hours silver chart [ Kitco Inc. ]

July silver bears have gained the overall near-term technical advantage as prices hit a three-week low overnight. The next upside price breakout objective is closing futures prices above solid technical resistance at last week’s high of $17.745 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the April low of $16.06. First resistance is seen at $17.00 and then at $17.215. Next support is seen at the overnight low of $16.62 and then at $16.50. Wyckoff’s Market Rating: 4.0.