Gold, silver rally on weaker dollar after crude collapses on Iran ceasefire hopes
Spot gold prices are sharply higher and spot silver prices are also stronger in early U.S. trading Wednesday, as a weaker U.S. dollar, lower Treasury yields and a sharp pullback in crude oil prices revived buying across the precious metals complex. At the time of writing, spot gold was trading near $4,683.28 an ounce, up 2.77% over the past 24 hours, while spot silver was trading at $76.840, up 5.52% from Tuesday’s price.
The main overnight driver was the reversal in the oil shock. Brent crude fell as much as 11% to $97.48 a barrel, while WTI dropped 11.3% to $90.74, after Reuters reported the U.S. and Iran were moving closer to an initial peace deal and Iran’s Revolutionary Guard navy said the Strait of Hormuz could reopen after the end of “threats from aggressors.”
The move pulled inflation-risk hedges out of crude and into duration-sensitive assets. The 10-year U.S. Treasury yield fell to 4.370%, while the U.S. dollar index slipped 0.48% to 97.97. Gold’s bid improved as the market repriced lower energy inflation and less restrictive Fed risk.
The first major U.S. data point of the morning was firmer than expected. ADP said private-sector employment rose by 109,000 in April, with annual pay up 4.4%. ADP’s dashboard showed gains led by education and health services at 61,000, trade, transportation and utilities at 25,000, construction at 10,000 and financial activities at 9,000. “Small and large employers are hiring,” Nela Richardson, chief economist at ADP, said this morning, while noting softness among mid-sized firms.
The stronger ADP print keeps Friday’s nonfarm payrolls report in focus, but it did not blunt the metals rally because the cross-asset impulse came from oil, yields and the dollar. Traders are also watching the EIA crude oil inventory report later Wednesday for confirmation of whether the oil selloff is a geopolitical premium leaving the market or a broader supply-demand reset.
Global equities rallied on the de-escalation trade. The S&P 500 was up 0.85%, the Nasdaq was up 1.06% and the Dow was up 1.10%, while Europe was firmer with the FTSE 100 up 2.07%, CAC 40 up 2.91% and DAX up 1.87%. In Asia, South Korea’s Kospi gained 6.45%, Hong Kong’s Hang Seng rose 1.22% and Australia’s ASX 200 added 1.30%.
David Morrison, Senior Market Analyst at Trade Nation, said the oil move “triggered a wave of risk-on trading across financial markets,” while warning that normal shipping and trade flows could take months to recover even if the Strait of Hormuz reopens.
The key outside markets see Nymex WTI crude oil prices sharply lower and trading around $96.33 a barrel, while Brent crude was near $102.97. The U.S. dollar index is softer. The yield on the benchmark 10-year U.S. Treasury note is trading near the 4.4% area.
Technically, spot gold is extending its rebound after Monday’s selloff, with bulls’ next upside price objective to push prices above the $4,722.77 to $4,750 resistance zone, which would open the door to a move toward $4,800 to $4,850. Bears’ next near-term downside price objective is a break below $4,600, with deeper downside targets at $4,568.89 and then $4,514.12. First resistance is seen at $4,722.77 and then at $4,750. First support is seen at $4,600 and then at $4,568.89.
Spot silver bulls’ next upside price objective is to drive prices above the $77.00 to $77.80 resistance zone, with a move above that area targeting $78.50. The next downside price objective for the bears is a break below $75.00, with deeper downside targets at $73.80 and then $72.82. First resistance is seen at $77.00 and then at $77.80. Next support is seen at $75.00 and then at $73.80.
