The strength of the U.S. dollar growing on the foreign exchange market, low prices of crude oil and increasing government bond market yields are negatively affecting consumer demand for safe-haven metals such as silver and gold.
Market watchers are paying attention to Asian shares following President Xi Jinping’s power grab at the most recent communist party meeting. During the meeting, the Chinese president had aids remove a former party leader seated next to him from the National Congress. This action led stocks in the Asian market to drop, with investors in Asia expecting that Xi will soon move the country’s economy farther away from the West.
Currently, strict lockdowns imposed as a result of the coronavirus pandemic in China continue to negatively affect the nation’s economy, which is the second biggest globally. Thus far, the Chinese yuan has declined in value by 13% with the latest sell-off following a 7% drop in the Hang Seng index.
One SP angel broker stated that traders were losing faith in the East-Asian nation following Jinping’s shake up at the confab meeting, especially after Xi appointed loyal hardliners with unfriendly market policies who were committed to zero Covid to the Politburo.
Following the drop in the value of the yuan, the People’s Bank of China moved the upper limit for cross-border financing in an effort to boost inflows of foreign capital.
Meanwhile, the U.S. dollar index has slightly improved even with the drop in the price of crude oil on Nymex. Recently released economic data from the United States includes the Richmond Fed business survey, the monthly house price index, the weekly chain store sales and Johnson Redbook indexes, the consumer confidence index and the S&P Case-Shiller home indexes.
Gold futures still have a solid technical advantage in the near term, with the next upper side price objective of bulls being to close prices above solid resistance at $1,700. The next downside price objective of bears is to push closing prices below solid support at $1,600.
Silver bears have a firm overall technical advantage in the near term. However, the observed price action suggests that the metal’s price may soon begin to trend upwards. The next upper side price objective of silver bulls is to produce a close above solid technical resistance at its current high of $21.31 while the next downside price objective of bears is to push futures prices below solid technical support at its last month’s low. In the meantime, miners such as Hecla Mining Company (NYSE: HL) likely have plans in place to ride out any short- to medium-term turbulence in the metals market.
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