Gold Pauses Amid Plunging U.S. Stock Market
(Kitco News) - Gold prices are near steady in early U.S. trading Thursday. The yellow metal is presently in a pause mode as traders await the opening of the U.S. equities markets, in what is likely to be a volatile trading session today. February gold futures were last up $0.90 an ounce at $1,243.40. March Comex silver was down $0.102 at $14.48 an ounce.
The just-released ADP national employment report showed a rise of, 179,000, which is just below the expectations for a gain of 190,000. The metals markets upticked modestly just following this report. This report is the precursor to the more important Labor Department Employment Situation Report for November on Friday morning. The key non-farm jobs number in that report is forecast up 198,000.
Risk aversion is back in full force in the world marketplace Thursday. World stock markets were lower overnight, with U.S. stock indexes set to open sharply lower on strong follow-through selling from big losses Tuesday. U.S. stock and financial markets were closed Wednesday for a national day of mourning the death of former President George H.W. Bush.
There are several bearish factors at work spooking world stock markets. Chinese tech giant Huawei’s chief financial officer was arrested in Canada, on behalf of the U.S., and will be extradited to the U.S. Her company may be shipping high tech products to Iran, which would violate U.S. sanctions against Iran. This sparked fears the U.S.-China trade tensions could rise further, despite last weekend’s trade truce between the world’s two largest economies. Chinese government officials said Thursday they are still planning to work with U.S. trade officials over the next 90 days to come to agreement.
A big drop in crude oil prices Thursday is also weighing on trader and investor sentiment. Nymex crude oil prices are sharply lower and trading just above $51.00 a barrel. The OPEC oil cartel is meeting in Vienna, Austria on Thursday. Reports said OPEC heavyweight Saudi Arabia has not yet agreed to a production cut, but that it may before the meeting ends on Friday. This has many crude oil market watchers wondering about any collective production cut being extended, after most reckoned such would be the case before the meeting began.
Trader are also anxiously awaiting another speech from Federal Reserve Chairman Jerome Powell today, wondering if he will elaborate on U.S. monetary policy direction.
Another feature in the marketplace recently that also has the stock market wobbly is falling U.S. Treasury yields (rising prices). The five-year T-Note yield this week dropped below the lower maturities. A fully inverted yield curve has been historically bearish for the U.S. economy and stock market. Right now the 10-year Treasury note yield remains above the 2-year, so the yield curve is not fully inverted.
The other key outside markets today find the U.S. dollar index modestly lower.
And it’s a very busy day of U.S. economic data due for release Thursday, which includes the weekly jobless claims report, the Challenger job-cuts report, the ADP national employment report, the U.S. international trade report, the U.S. and global services PMIs, manufacturers’ shipments and inventories, the ISM non-manufacturing report on business, monthly chain store sales, and the weekly DOE liquid energy stocks report. Several Fed officials also speak today, including Chairman Powell.
Technically, gold bulls and bears are on a level overall near-term technical playing field, but the bulls still have some momentum on their side. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the October high of $1,252.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at last week’s low of $1,216.80. First resistance is seen at this week’s high of $1,247.50 and then at $1,252.00. First support is seen at Wednesday’s low of $1,238.70 and then at Tuesday’s low of $1,235.80. Wyckoff's Market Rating: 5.0
March silver futures bears still have the firm overall near-term technical advantage. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at the October high of $15.055 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the November low of $13.985. First resistance is seen at this week’s high of $14.745 and then at $15.00. Next support is seen at this week’s low of $14.28 and then at last week’s low of $14.115. Wyckoff's Market Rating: 3.0.