Gold hits nearly 7-year high, backs off as bulls may be exhausted
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(Kitco News) - Gold prices are higher in midday trading Monday, but have backed well down from the overnight nearly seven-year high of $1,590.90, basis February Comex gold. Today’s low-range close hints that the gold bulls have run out of gas on a short-term basis and need a rest, or pause. Meantime, silver futures scored a more-than-three-month high of $18.55, basis March Comex futures. High geopolitical tensions are and will likely continue to support the safe-haven metals. February gold futures were last up $13.80 an ounce at 1,566.20. March Comex silver prices were last down $0.016 at $18.14 an ounce.
The U.S. stock indexes coming well up from their overnight lows also encouraged some profit taking in gold from the short-term futures traders, following the recent good gains.
As I reported early this morning, for the very short-term traders of gold (usually futures markets), here’s an important development: History shows that a big spike up in prices amid higher volatility tends to produce near-term market tops sooner rather than later, after that initial spike up. That means in the coming days the gold market could put in a “near-term” top that will last for a moderate period of time. However, for the longer-term investors in gold, it’s important to note that the recent strong price gains are a bullish upside technical “breakout” from recent trading levels, to suggest still more price gains are very likely in the coming weeks and months, or longer.
Global stock markets are still upset on geopolitical fears following the U.S. drone strike late last week that killed Iran’s leading military figure. Asian and European stocks were down overnight.
The key “outside markets” today see crude oil prices near steady after hitting a 22-month high at $64.72 a barrel overnight. Meantime, the U.S. dollar index is weaker amid a five-week-old downtrend in place on the daily bar chart.
The weekend saw more saber-rattling from the U.S. and Iran. President Trump tweeted that the U.S. has 52 Iranian sites set for attack if Iran retaliates against the U.S. for the killing of its general. Meantime, Iraqi’s government voted to expel U.S. troops from Iraq, which prompted a response from Trump that the U.S. would impose economic sanctions on Iraq if such occurred. Nations around the globe issued proclamations urging restraint on the matter from both the U.S. and Iran. This is arguably the most serious geopolitical development in many years, and whose repercussions will play out for a long time to come. That will likely keep trader and investor risk aversion elevated for some time to come. That’s bullish for safe-haven assets like precious metals and U.S. Treasuries.
Technically, February gold futures prices gapped higher on the daily bar chart and hit a nearly seven-year high today, but then backed off to close near the session low. Today’s price action produced a buying “exhaustion tail” on the daily bar chart, whereby the bulls appear to have run out of gas. Now, today’s high of $1,590.90 is very strong overhead technical resistance for the bulls to overcome. The bulls still have the solid overall near-term technical advantage amid a seven-week-old price uptrend in place on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,590.90. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,530.00. First resistance is seen at $1,575.00 and then at $1,585.00. First support is seen at $1,556.60—the bottom of today’s upside price gap on the daily bar chart--and then at 1,550.00. Wyckoff's Market Rating: 8.0
March silver futures prices closed nearer the session low after hitting a 3.5-month high early on today. The silver bulls have the firm overall near-term technical advantage amid a four-week-old price uptrend in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $19.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.50. First resistance is seen at today’s’ high of $18.55 and then $18.75. Next support is seen at $18.00 and then at last week’s low of $17.83. Wyckoff's Market Rating: 7.0.
March N.Y. copper closed up 5 points at 278.75 cents today. Prices closed near the session high today. The copper have the overall near-term technical advantage. However, a four-month-old uptrend on the daily bar chart is now in jeopardy. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 290.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 270.00 cents. First resistance is seen at 280.00 cents and 283.00 cents. First support is seen at last week’s low of 275.95 cents and then at 273.00 cents. Wyckoff's Market Rating: 6.5.