Roundup Price pressure on gold, silver following hot U.S. inflation data

Gold and silver prices are solidly lower in early U.S. trading Tuesday following a surprisingly hotter-than-expected inflation report that reinforces notions the Federal Reserve will keep its aggressive monetary policy tightening stance. October gold was last down $20.10 at $1,710.90 and December silver was down $0.22 at $19.63.

The August consumer price index was reported up 8.3%, year-on-year, compared to forecasts for up 8.0%. On a monthly basis, the August CPI rose 0.1% from July. The July CPI report showed an 8.5% rise, annually. The food and energy component of the CPI report was up 0.6% in August, which is double the expectations for a rise of 0.3%. There had been some signs in the economy that inflation in the U.S. is cooling off a bit, but today’s data suggests inflation is still running hot and may get hotter. Today’s CPI data pretty much assures the Federal Reserve’s FOMC next week will raise the main U.S. interest rate, the Fed funds rate, by at least 0.75%. Fed funds rate futures are suggesting a 20% chance the FOMC could rase the Fed funds rate by 1.0% at next week’s FOMC meeting.

Global stock markets were mixed but mostly firmer overnight. U.S. stock indexes were pointed to higher openings when the New York day session begins, but then sold off sharply after the CPI report and are set for sharply lower openings. The major U.S. stock indexes have seen short-term price downtrends negated.

King dollar dominating gold, silver, but precious metals are ripe for a short squeeze
The key outside markets today see Nymex crude oil prices firmer and trading around $88.25 a barrel. The U.S. dollar index is higher in early U.S. trading and rebounded from lower levels overnight. The yield on the 10-year U.S. Treasury note rose after the CPI report and is fetching 3.418%.

Other U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and chain store retail sales indexes, the NFIB small business index, real earnings, the IDB/TIPP economic optimism index, and the monthly Treasury budget statement.

Technically, the October gold futures bears have the overall near-term technical advantage. Prices are still in a downtrend on the daily bar chart. However, a bullish double-bottom reversal pattern could be forming on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,769.30. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the July low of $1,686.30. First resistance is seen at $1,725.00 and then at this week’s high of $1,736.40. First support is seen at $1,700.00 and then at $1,686.30. Wyckoff’s Market Rating: 2.0

September silver futures bears have the overall near-term technical advantage but the bulls have gained momentum. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $21.00. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at $20.00 and then at $20.25. Next support is seen at the overnight low of $19.51 and then at $19.00. Wyckoff’s Market Rating: 3.5.