Gold and silver prices took a hit on Monday amid a bearish global market setting. This was largely due to an uptick in the U.S. dollar index, increased U.S. Treasury yields, and weaker crude oil prices. Additionally, last week’s strong U.S. jobs report had an impact on the precious metals market, signaling potential tightening of U.S. monetary policy.
Overnight trading saw an even mix in Asian and European stock markets, with U.S. stock index futures also set to open slightly lower.
The week started with a surge in risk aversion, following weekend air strikes in Syria and Iraq by the U.S. and U.K. This was later followed by the unfortunate news of drone attacks on a Syrian base housing U.S. troops.
The Eurozone December producer price index was reported down 0.8% from November and down 10.6%, year-on-year.
Speaking of key outside markets, the U.S. dollar index is riding high and hitting a nearly three-month peak. At the same time, Nymex crude oil prices were weaker and trading around $71.25 a barrel, and the yield on the benchmark 10-year U.S. Treasury note was fetching 4.079%.
As the week unfolds, investors will be looking to U.S. economic data due for release on Monday, including the U.S. services purchasing managers’ index (PMI), the ISM report on business services, the global services PMI and the employment trends index.
From a technical analysis perspective, gold futures have a slight overall near-term technical advantage. Resistance and support levels are set at $2,050.00 and $2,036.80, respectively. On the other hand, silver bears have the overall near-term technical advantage, with the next downside price objective set at $21.17.
This bearish start could prompt investors to look towards alternative investment avenues until market conditions improve.
Additional insight:
Despite the bearish start to the week, gold and silver have been considered safe-haven assets that tend to perform well during times of market uncertainty. Therefore, while the immediate future may be unclear, investors should consider market volatility and ongoing geopolitical issues as determining factors. Furthermore, as the markets navigate through various economic reports and U.S. policy decisions, the volatility in precious metals prices may persist, prompting traders and investors to exercise caution.
