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Gold and Silver Are Breaking Down

WT24 Desk

European stocks and Wall Street futures climbed Thursday on upbeat corporate results and signs of a firming economy, brushing off a steep drop in commodity prices, WSJ reports.

 Futures pointed to a 0.3% opening gain for the S&P 500 and Dow Jones Industrial Average.

The Euro Stoxx 50 index of blue-chip eurozone companies was up 0.9% in recent trading after a measure of activity in the eurozone’s manufacturing and services sectors rose to a six-year high, retail sales figures improved and a gauge of Italy’s services sector reached its highest in a decade.

The stock-market gains came despite a steep drop in commodities prices that weighed on mining shares, with Brent crude oil last down 1.9% at $49.82 a barrel and metals prices lower across the board. China’s iron-ore futures opened at the 8% limit drop, while copper futures in London were last down 1.9% and gold fell 1.1% to $1,234.60 an ounce.

BREAKFAST BRIEFING

Investors have lost their appetite for precious metals.

Gold and silver prices have been under such pressure that technical factors suggest there could be more selling to come.

Both gold and silver often are viewed as bulwarks against market turmoil and sudden aversion to them is a sign that geopolitical concerns are unwinding. Weakness in the metals also highlights anticipation for a Federal Reserve rate increase next month.

Gold futures Wednesday settled down 0.7% at $1,246 an ounce, the lowest price in a month. Silver, which has tumbled 11 out of the past 12 sessions, fared worse, sinking 1.7% to its lowest price since January. And both are again down in the early going Thursday.

Both metals tumbled in the immediate wake of November’s presidential election, but found newfound favor earlier this year amid uncertainty about the timing of the Trump administration’s pro-growth policies and saber-rattling over Syria and North Korea. Also looming was politial anxiety in France, where far-right leader Marine Le Pen, who made overtures about exiting the eurozone, was making strides in the presidential race.

Gold and silver have sold off as Ms. Le Pen’s odds to win this weekend have grown longer. Silver is down about 11% since April 17.

Then Federal Reserve policymakers on Wednesday added to the selling pressure on the metals. The Fed’s policy statement implied that the central bank is on track to boost interest rates twice more this year. Precious metals tend to fare poorly as rates rise. A rising dollar is a problem, too, since the metals, priced in dollars, become pricier to foreign buyers. The WSJ Dollar Index climbed 0.5% on Wednesday, the biggest rise in two months.

Charts for both are likewise sending cautious signals about precious metals. Gold this week knifed below both its 50- and 200-day moving average, price levels associated with market momentum. Silver has fallen so swiftly that it has closed for seven sessions in a row beneath a momentum indicator known as the Bollinger Bands, tied for the longest such streak in history, according to SentimentTrader.

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