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Safe-Haven Demand Continues for Gold

(Kitco News) - Gold prices are moderately higher and trading back above $1,100.00 in early U.S. trading Monday. More safe-haven buying interest is seen in the gold market after good gains last week that saw prices hit a two-month high. Gold prices have rallied by about 4% so far in 2016. The near-term technical posture in gold has also improved markedly early this year, to also prompt some chart-related buying. February Comex gold was last up $5.70 at $1,103.60 an ounce. March Comex silver was last up $0.107 at $14.02 an ounce.

There is still anxiety in the world marketplace Monday after the Chinese stock market dropped sharply overnight, by over 5%, and hit a four-year low in Hong Kong. Chinese financial and monetary authorities mostly stood aside and let the market trade after last week halting trading with circuit-breakers at one point. China officials did push up the value of the yuan against the U.S. dollar Monday, but that did little to stem the selling pressure on China equities. Australian and South Korean stocks also fell Monday. Japan’s markets were closed for a holiday.

The turmoil in China is prompting strains in the periphery currency markets early this year, reports said.

Crude oil prices are lower again to start the trading week, which is also a concern for the market place—namely the deflationary implications. Nymex crude is trading around $32.50 a barrel. The other key “outside market” finds the U.S. dollar index trading slightly lower in early U.S. dealings.

Recent weaker Chinese economic data has spooked world markets. China is the world’s second-largest economy and is the world’s largest raw commodity importer.

Over the weekend the U.S. few a B-52 bomber with fighter jet escorts near the North Korean border, in a show of military might following last week’s apparent nuclear bomb test conducted by North Korea.

And there is still market concern about escalating violence in the Middle East as Saudi Arabia and Iran are in a stare-down at present.

Still, European stock markets were steady to only slightly weaker Monday and U.S. stock indexes are pointed to slightly higher openings today, following the overnight stock market sell off in Asia and last week’s rout in U.S. equities that was the worst opening week sell off in history. The recent “bad news” may now be mostly factored into U.S. and European stock and financial markets.

U.S. economic data due for release Monday is light and includes the employment trends index.

(Note: Follow me on Twitter--@jimwyckoff--for breaking market news.)

Wyckoff’s Daily Risk Rating: 3.0 (Trader and investor market risk aversion is still a bit elevated.)

(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 5, with 1 being least risk-averse (most risk-on) and 5 being the most risk-averse (risk-off).

Technically, gold bears still have the overall near-term technical advantage, but the bulls have gained upside momentum to suggest a market bottom is in place. Price action recently produced a bullish upside “breakout” from the sideways trading range at lower levels seen the past month. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,125.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,080.00. First resistance is seen at today’s high of $1,108.30 and then at last week’s high of $1,113.10. First support is seen at the overnight low of $1,098.70 and then at Friday’s low of $1,091.80. Wyckoff’s Market Rating: 3.5

Silver bears have the solid overall near-term technical advantage, as this market does not have the safe-haven status that does gold. Silver bulls’ next upside price breakout objective is closing December futures prices above solid technical resistance at the December high of $14.64 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the contract low of $13.62. First resistance is at $14.25 and then at last week’s high of $14.385. Next support is seen at the overnight low of $13.93 and then at $13.75. Wyckoff's Market Rating: 2.0.

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

 

 

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