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A.M. Kitco Metals Roundup: Gold Near Steady; U.S. Treasury Market Sensing Trouble Ahead

Friday May 16, 2014 8:15 AM

(Kitco News) - Gold futures prices are slightly higher and spot gold prices are slightly lower in early U.S. trading Friday. Trading has been choppy this week but the gold bulls have taken away the near-term technical advantage from the bears. June gold was last up $1.50 at $1,295.00 an ounce. Spot gold was last quoted down $1.30 at $1,296.00. July Comex silver last traded down $0.089 at $19.395 an ounce.

The talk of the market place—but not yet pervasive in the general business media--late this week has been the rally in the U.S. Treasury market prices. T-Bond and T-Note futures prices are at multi-month highs (yields at multi-month lows). There’s an ages-old debate on which group—bond traders or stock market traders--is “right” about the direction of the U.S. economy and the major world economies. At present, the stock market traders, with two major indexes hitting record highs this week, apparently reckon the U.S. economy is on a path of significant recovery.

Meantime, U.S. Treasury bond and note prices have rallied sharply this week, which suggests something is amiss either in the U.S. economy or regarding other major world economies, or geopolitical fears. I’m siding with the bond market traders. Something is askew in the market place at present—and the bond market senses it. The reason the U.S. Treasury markets are rallying is “flight to quality” buying due to some fear. That’s got to be the reason because Treasury yields well below 3% presently don’t match up with what the stock market has been offering on return on investment. The recent sharp reversal up in the U.S. dollar index and reversal down in the Euro currency are also indicative of changes afoot in the structure of the markets.

 It’s my bias that in the coming weeks, or sooner, it will become clearer just why the U.S. Treasury market prices are presently and inexplicably rallying.

As far as the gold market goes regarding the matter mentioned above, the yellow metal should at least see limited selling pressure, if not outright buying support, due to the keener uncertainty in the market place at present that should prompt safe-haven demand. But that’s not a certainty when looking at daily price action for gold. During the peak of the European Union sovereign debt crisis, gold on some days would be selling off when most market watchers figured it should be rallying, and on other days would be rallying when most thought it would be selling off. Stay tuned.

U.S. economic data due for release Friday includes new residential construction and the University of Michigan consumer sentiment survey.

Wyckoff’s Daily Risk Rating: 7.0 (The Russia-Ukraine tensions are still elevated and U.S. Treasuries are rallying on safe-haven buying.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,293.75 versus the previous P.M. fixing of $1,299.00.

Technically, June gold futures bulls and bears are on a level near-term technical playing field. That suggests this market could continue to trade sideways and choppy, in a range. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the May high of $1,315.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at this week’s low of $1,277.70. First resistance is seen at $1,300.00 and then at this week’s high of $1,309.20. First support is seen at Thursday’s low of $1,290.90 and then at $1,285.00.  

July silver futures bears still have the overall near-term technical advantage. However, prices are “basing” at lower price levels, to begin to suggest a market bottom is in place. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $20.005 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at this week’s low of $19.045. First resistance is seen at the overnight high of $19.53 and then at $19.77. Next support is seen at the overnight low of $19.33 and then at $19.045.


By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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