Gold AND silver pounded by strong USDX, rising bond yields, lower oil

NEW YORK (July 15)  Gold and silver prices were solidly down in U.S. trading Thursday. Gold scored an 11-month low and silver a two-year low. Rising U.S. Treasury bond yields, a strong U.S. dollar index and falling crude oil prices are all bearish elements working against the metals market bulls. Recession fears and the resulting reduced consumer and commercial demand for metals are also squelching the bulls. August gold futures were last down $28.10 at $1,707.50. September Comex silver futures were last down $0.954 at $18.235 an ounce.

On tap today was the U.S. producer price index report for June, which came in hot at up 1.1% from May and up over 11%, year-on-year. The figure was expected to see a monthly rise of 0.8% following May's reading of up 0.8% from April. Markets showed little reaction to the data, after Wednesday's CPI report that showed about the same results—problematic price inflation.

Global stock markets were mostly down overnight. U.S. stock indexes are lower at midday. Trader and investor risk aversion is keener late this week, following Wednesday's U.S. consumer price index report that ran hotter than expected at up 9.1% in June, year-on-year, and at a 41-year high.

A feature in the marketplace for some time has been the strong appreciation of the U.S. dollar against other major currencies. Today, the U.S. dollar index, which is a basket of six major currencies weighted against the greenback, hit another 20-year high. The significant interest rate differentials in major economies, with the U.S. rates being higher, is prompting the so-called “carry trade” to be prominent, whereby international traders and institutions swap out their own currencies in favor of owning the U.S. dollar. History suggests this phenomenon can remain in place for quite some time, only making the greenback stronger.

KITCO