Hotter U.S. data puts price pressure on gold, silver

(Kitco News) – Gold and silver prices are down and hit multi-week lows in early U.S. trading Thursday, following a batch of U.S. economic data that showed an uptick for producer inflation and solid retail sales. Both reports fall into the camp of the U.S. monetary policy hawks, and that’s bearish for the metals. December gold was last down $8.90 at $1,923.60 and December silver was down $0.50 at $22.68.

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The just released U.S. producer price index for August came in hot, at up 0.7% versus expectations for a rise of 0.4%. The “core” PPI reading (that’s minus food and energy) was up 0.2%, which is right in line with market expectations. Meantime, U.S. retail sales in August were up 0.6% versus market expectations for a rise of 0.1%. These numbers suggest the Federal Reserve will continue to raise interest rates to choke off inflation, but also slow economic growth. That would likely mean less demand for raw commodities, including the metals.

In overnight news, China’s central bank is again easing its monetary policy, this time by cutting is reserve requirement ratio for banks by 0.25%, effective Friday. The central bank is trying to revive the world’s second-largest economy.

The European Central Bank held its regular monetary policy meeting Thursday and slightly raised its main interest rate by 0.25 percent, to 4.0%.

The key outside markets today see the U.S. dollar index solidly higher after the stronger U.S. retail sales and hotter PPI. Nymex crude oil prices are higher and trading around $90.00 a barrel. Prices hit a 10-month high overnight. The benchmark U.S. Treasury 10-year note yield is presently fetching around 4.27%.

Technically, the gold futures bears have the firm overall near-term technical advantage as prices hit a three-week low overnight. Prices are trending lower again. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at this week’s high of $1,954.60. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the August low of $1,913.60. First resistance is seen at today’s high of $1,934.50 and then at Wednesday’s high of $1,938.40. First support is seen at today’s low of $1,921.70 and then at $1,913.60. Wyckoff’s Market Rating: 3.0

The silver bears have the firm overall near-term technical advantage as prices hit a four-week low overnight. Silver bulls’ next upside price objective is closing December futures prices above solid technical resistance at this week’s high of $23.515. The next downside price objective for the bears is closing prices below solid support at the August low of $22.585. First resistance is seen at $23.00 and then at today’s high of $23.265. Next support is seen at $22.585 and then at $22.25. Wyckoff’s Market Rating: 3.0.