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(Kitco News) – Gold and silver prices are trading not far from unchanged levels on the day in early U.S. dealings Wednesday. The precious metals are treading water ahead of the conclusion of a major central bank meeting this afternoon. June gold was last up $1.40 at $2,024.70 and July silver was down $0.084 at $25.545.
On deck this afternoon is the conclusion of the U.S. Federal Reserve’s Open Market Committee (FOMC) meeting that began Tuesday morning and ends Wednesday afternoon with a statement and press conference from Fed Chairman Jerome Powell. The FOMC is expected to raise its main U.S. interest rate (the Fed funds rate) by 0.25%.
Said analyst Craig Erlam of OANDA in a morning email dispatch: “Today was always likely to mark the end of the U.S. central bank’s tightening cycle–not that it has explicitly signaled this–but we’ve now reached a stage in which every rate hike could have unwanted and unintended consequences. Turbulence in the banking system in March is evidence of that and the rescue of First Republic Bank by JP Morgan in recent days, and the sell-off that followed in other regional banks, suggests significant stress remains. Which begs the question, why would the Fed opt to tighten at all today when it can see that the financial system is under strain, credit conditions have tightened as a result and the lag with which monetary policy operates means they don’t yet fully understand what the full impact of their recent rate hikes has been.”
The European Central Bank also meets Thursday. The ECB is also expected to raise its main interest rate by a quarter-point. Also, on Friday comes the U.S. employment situation report from the Labor Department.
Global stock markets were mixed to higher overnight. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. Risk aversion has up-ticked at mid-week, following solid losses in the U.S. stock market Tuesday, led by banking shares. After a period of calm, there are renewed worries about the U.S. banking sector, especially regional banks, whose shares dropped sharply Tuesday. Also, U.S. Treasury Secretary Janet Yellen has warned the U.S. government could be in default on some of its payments by June 1 if the debt limit is not increased. President Biden will meet congressional leaders at the White House next week to discuss the matter.
Another feature in the marketplace this week is plunging crude oil prices that hit a five-week low overnight. Concerns about slowing global economic growth have hit the crude oil market hard. Nymex crude is presently down over $2.00 on the day and trading at $69.55 a barrel. Nymex crude is presently down around $14 a barrel from the April high.
The other key outside markets today see the U.S. dollar index lower. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.405%. Treasury yields have dipped this week on flight-to-quality buying amid the wobbly U.S. banking stocks.
Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the weekly DOE liquid energy stocks report, the U.S. services PMI and the ISM report on business services.
Technically, the gold futures bulls have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the April high of $2,063.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the April low of $1,965.90. First resistance is seen at $2,031.70 and then at $2,050.00. First support is seen at $2,010.00 and then at $2,000.00. Wyckoff’s Market Rating: 8.0
The silver bulls have the firm overall near-term technical advantage. Silver bulls’ next upside price objective is closing July futures prices above solid technical resistance at the April high of $26.435. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at Tuesday’s high of $25.765 and then at $26.00. Next support is seen at $25.25 and then at $25.00. Wyckoff’s Market Rating: 7.5.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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