During early US trading hours on Thursday, spot gold strengthened while spot silver fell sharply. Surging oil prices and rising US Treasury yields have put inflation pressure and risks of further Fed policy tightening back at the core of precious metals trading. As of press time, spot gold traded near $4115 per ounce, up 0.1% on the day.

(Source: FX168)

Spot silver traded near $58.811 per ounce, down 1.6% on the day.

(Source: FX168)

Cooling Employment Coexists With Inflationary Pressures

Markets are currently caught between weak employment signals and strong inflationary backdrop. US Labor Department data showed initial jobless claims fell to 197,000 in the week ending October 3, a decrease of 2,000 from the revised reading of the prior week. Continuing jobless claims for the week ending September 26 rose to 1.716 million. The non-farm payroll report released last week showed the US added merely 29,000 jobs in September. Meanwhile, the Fed meeting minutes released on Wednesday indicated most policymakers still expected one more interest rate hike within the year.

The US 10-year Treasury yield hovered near 5.3%, while the 30-year yield stayed close to a 24-year high. Traders are watching the $22 billion 30-year US Treasury auction on Thursday, the preliminary October Consumer Confidence report due Friday, and next week’s CPI data. Further weakness in employment or confidence data will support gold by reinforcing the narrative of slowing wages and employment. However, gold may remain pressured if inflation expectations stay sticky, demand for long-dated bonds remains weak, or oil prices push yields higher.

Middle East Tensions Push Oil Prices Higher

The Strait of Hormuz and US-Iran tensions remain the dominant risk factor for crude oil markets, and indirectly bear negative pressure on gold through inflation and yield transmission channels. Brent crude once broke above $104 per barrel and WTI crude topped $92 per barrel after another oil tanker was attacked near northern Qatar. Weekly ship attack frequency around the PeRSIan Gulf and Strait of Hormuz has climbed to the highest level since the outbreak of the Iran conflict. At the same time, hurricane-related shutdowns in the US Gulf of Mexico have aggravated supply tightness, with roughly a quarter of Gulf of Mexico crude output offline.

Normally, geopolitical risks support gold, but market transmission turned more complex on Thursday: rising oil prices lifted inflation expectations and pushed yields higher, weighing on equities and silver. Silver has both precious metal and industrial metal attributes and tends to be more vulnerable amid weak risk appetite and rising yields.

US Stock Futures Under Pressure

Global risk sentiment deteriorated further ahead of the US opening bell. Dow futures dropped 462 points, or 0.9%; S&P 500 futures fell 39.5 points, or 0.5%; Nasdaq 100 futures declined 231.75 points, or 0.73%. Tech giants and chip stocks moved lower as yields climbed. The S&P 500 and Nasdaq had already retreated from record highs on Wednesday.

Markets are awaiting results of the long-term Treasury auction to test whether investor demand for duration assets remains solid after the sharp rise in borrowing costs this week. Weak demand for long bonds could push yields further upward, continuing to pressure non-interest-bearing gold and risk sentiment which is more sensitive to silver.

External Markets and Technical Levels

In external markets, Nymex WTI crude hovered near $92.28 per barrel, Brent crude close to $104.75 per barrel; the benchmark US 10-year Treasury yield stood around 5.3%, and the US Dollar Index strengthened. The Kitco Global Index measures the respective contributions of US dollar factors and gold-specific factors to intraday gold price movements.

On the technical front, the next target for spot gold bulls is to reclaim the resistance zone of $4151.29 to $4199.06. A sustained breakout would open the way toward $4226.00 and further to $4230.51. The near-term target for bears is to break below $4118.19. If breached, subsequent downside targets are $4103.00 and $4066.00. The first resistance sits at $4151.29, followed by $4199.06; the first support is $4118.19, then $4103.00.

For spot silver, bulls need to push prices back above the $60.451–$61.162 zone. A successful breakout would target $62.046 and the 50-day moving average near $64.210. The next target for silver bears is to break below $58.681. Further downside would test $57.000 and $54.780. The first resistance is $60.451, followed by $61.162; the next support is $58.681, then $57.000.