Gold and Silver Prices Drop Amid Economic Factors
Spot prices for gold and silver saw a sharp decline in late afternoon trading on Thursday. This drop can largely be attributed to rising U.S. Treasury yields, a stronger U.S. dollar, and increasing oil prices, which have overshadowed the safe-haven demand linked to the ongoing U.S.-Iran conflict. At that moment, gold was priced at approximately $4,047.80 per ounce, marking a decrease of 1.98%. Silver followed suit, trading at about $57.64, down 3.46% during the session.
Gold fluctuated between $4,039.40 and $4,141.70 during the trading session. However, after failing to break through the trendline resistance, it fell below the $4,100 mark, settling near the lower end of its daily range. For silver, the trading range was from $57.21 to $60.95, but it couldn’t surpass the $60.75 level and instead pulled back toward the $58.73 support level noted in recent technical analyses.
In North America, major stock indices closed significantly lower, influenced by a decline in big tech stocks, rising oil prices, and climbing U.S. Treasury yields. The S&P 500 dropped 90.66 points, or 1.2%, landing at 7,408.30. The Nasdaq Composite Index fell by 553.21 points—or 2.2%—to 25,137.69, while the Dow Jones Industrial Average decreased by 506.93 points, about 1.0%, to 51,711.65. The Russell 2000 also dropped, falling 19.78 points (0.7%) to 2,940.16. In Canada, the S&P/TSX Composite Index slipped 0.21% to approximately 35,340.15.
European markets also felt the strain, with technology and consumer stocks particularly weak. The STOXX Europe 600 plummeted by 7.66 points or 1.18%, reaching 639.27. Germany’s DAX dipped by 0.8%, the CAC40 in France fell by 0.9%, London’s FTSE 100 dropped by 0.4%, and Italy’s FTSE MIB saw a significant decrease of 1.4% as the semiconductor sector faced ongoing challenges.
The recent economic data has positioned markets somewhat less dovishly than the earlier, softer CPI and PPI numbers indicated. While the European Central Bank decided to keep interest rates steady at 2.25%, officials are still wary of inflation risks tied to energy prices. Meanwhile, new U.S. jobless claims have decreased by 22,000 to 187,000, the lowest since September 1969, reinforcing the notion that layoffs are at historic lows, even amidst slowing hiring trends. As a result, the upcoming Fed decision, expected not to indicate a dovish shift, is being watched closely. The dollar remained stable, and 10-year Treasury yields hovered around 4.7%, with traders embedding inflation risk premiums into higher yields.
The situation in the Strait of Hormuz is currently tense, characterized by ongoing military and shipping pressures, rather than a standard operational climate. Brent crude prices rose above $100 during the session, fueled by a renewed energy security concern driven by an attack on a Saudi oil tanker and new conflicts involving Iranian-backed forces. As for gold, the factors at play present a dual impact. While geopolitical risks support defense demand, rising oil prices are increasing inflation expectations, which in turn drives up yields and dampens the appeal for non-yielding bullion. Overall, Thursday’s market saw oil prices rise, bonds come under pressure, a stronger dollar, falling stocks, and silver underperforming against gold.
Traders are closely monitoring forthcoming information from the Fed ahead of next week’s policy decision on July 29, developments concerning unemployment claims, anticipated U.S. PMI numbers, and any new disruptions in Hormuz and Red Sea shipping lanes. A sustained drop below $4,039.40 could jeopardize gold’s short-term recovery, while a close above $4,075 would alleviate some downward pressure for now.
In significant external markets, Nymex WTI crude oil prices have surged, trading around $92.00, while Brent crude exceeds $100.00. The U.S. dollar index remains strong, and the benchmark 10-year U.S. Treasury yield is around 4.7%.
From a technical perspective, gold bulls have lost short-term momentum, with prices slipping below the 100-period moving average of $4,083 and failing to break the downtrend line resistance at $4,148. The next price goal for bulls is to push back above $4,148, targeting $4,200 and possibly $4,246 thereafter. Conversely, bears are aiming for a move below $4,039.40, with deeper targets set at $4,020 and $3,957. Initial resistance is noted at $4,075 and then $4,148, with first support at $4,039.40 and subsequently at $4,020.
For silver, the bullish momentum has waned as prices could not maintain above the $60.75 breakout level, retreating towards the 50-period moving average of $58.50 and the 100-period average of $58.34. The silver bulls are targeting a reversal above $60.75, aiming for $61.88, then $63.18. Bears meanwhile look for a drop below $58.73, setting deeper targets at $57.47 and $56.12. The first resistance stands at $60.75, followed by $61.88, and the next support is at $58.73, then $57.47.
