Gold and silver futures prices are not straying too far from steady price levels in early U.S. trading Wednesday. Precious metals traders are awaiting this afternoon’s conclusion of the FOMC meeting. August gold was last down $5.10 at $4,349.10. July silver prices were last down $0.143 at $69.88.
This afternoon’s conclusion of the meeting of the Federal Reserve’s Open Market Committee (FOMC)--the first for new Chairman Kevin Warsh--see Fed watchers expecting Warsh to not make any waves in his first FOMC meeting. The U.S. central bank is expected to leave U.S. monetary policy unchanged today, with an FOMC statement and a following press conference from Warsh. Markets will be watching for changes in Fed communications under Warsh. Bloomberg Economics expects the new chair to forgo submitting his own interest-rate projection to the closely watched dot plot, a break from the practice followed by Jerome Powell, Janet Yellen and Ben Bernanke. “Warsh faces a formidable challenge, striking a balance between President Trump’s desire for lower rates and signaling to the market that he is a credible and independent Fed chair,” said Bank J Safra Sarasin equity strategist Wolf von Rotberg and as reported by Bloomberg. “Inflationary pressures in the U.S. are unlikely to abate quickly. Solid growth and elevated core inflation suggest a hawkish bias, regardless of oil prices.”
Nymex WTI crude falls to 3-mo. low below $75 a barrel. Nymex West Texas Intermediate crude oil futures prices briefly touched a fresh three-month low of $74.59, before paring its losses, with prices under heavy pressure from the looming U.S.-Iran peace deal that threatens to add a gush of barrels back to the market. “Shipowners are gearing up for the reopening by repositioning vessels toward the Middle East. Any eventual resumption could also lead to the release of more than 100 laden ships with oil from Middle East countries other than Iran that are stuck inside the Gulf, effectively acting as a stockpile release on the market,” said a Bloomberg report. “The prospect of a gush of supply is showing up in major market gauges. Key timespreads in the Middle Eastern Dubai market have already plunged into the bearish contango structure that signals oversupply. Brent’s nearest timespread was on a similar path on Wednesday. The International Energy Agency warned on Wednesday that the conflict is causing a bigger hit to demand than previously thought, saying in its first look at next year’s balances that it expects a renewed glut.”
Open Strait of Hormuz not enough to prevent further ECB rate hikes. European Central Bank officials are signaling that a U.S.-Iran peace accord won’t necessarily stop them from raising interest rates further, even if it prevents a more pronounced overshoot in inflation, according to a Bloomberg report. While policymakers including President Christine Lagarde welcome the prospect of oil shipments resuming through the Strait of Hormuz, they say significant economic havoc has already been inflicted and have no regrets about last week’s decision to hike. “Higher energy costs are likely to remain with us longer than many had hoped,” Governing Council member Peter Kazimir said. “Even with the just-announced U.S.-Iran peace framework, the damage in the Middle East cannot be undone overnight.” The main concern is that it will take time to restore production capacity, repair infrastructure and get ships sailing again. Meanwhile, efforts to rebuild inventories will keep crude prices elevated, said the report.
The key outside markets today see the U.S. dollar index slightly higher, while Nymex WTI crude oil prices are near steady, hit a three-month low overnight and are trading around $76.00 a barrel. The yield on the benchmark 10-year U.S. Treasury yield is presently 4.43%.
Technically, August gold futures prices are still trending down on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $4,500.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,000.00. First resistance is seen at this week’s high of $4,391.50 and then at $4,400.00. First support is seen at Tuesday’s low of $4,326.70 and then at this week’s low of $4,282.40. Wyckoff's Market Rating: 4.0
July silver futures bulls see their next upside price objective is closing prices above solid technical resistance at $75.00. The next downside price objective for the bears is closing prices below solid support at $60.00. First resistance is seen at this week’s high of $71.40 and then at $73.00. Next support is seen at this week’s low of $68.725 and then at $65.965. Wyckoff's Market Rating: 3.0
