Gold prices power to 7-yr. high; here's what price spike suggests
Editor's Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It’s a showdown of global proportions, so don’t miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.
(Kitco News) - Gold prices are again sharply higher and hit a nearly seven-year high of $1,590.90, basis February Comex gold, in early U.S. futures trading Monday. Meantime, silver futures scored a more-than-three-month high of $18.55, basis March Comex futures. High geopolitical tensions are driving the safe-haven metals north. February gold futures were last up $25.80 an ounce at 1,578.20. March Comex silver prices were last up $0.319 at $18.47 an ounce.
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 reeling 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 and the U.S. stock indexes are set to open the New York day session with solid losses.
The key “outside markets” today see crude oil prices higher and at a 22-month high, after hitting $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.
In other overnight news, the Euro zone producer price index for December came in at up 0.2% on the month and down 1.4%, year-on-year. Very low inflationary pressures in the world’s major economies continues to be a concern for the major central banks of the world.
U.S. economic data due for release Monday includes the U.S. services purchasing managers’ index (PMI) and the global PMI.
Technically, the gold bulls have the solid overall near-term technical advantage and gained more power today as an accelerating price uptrend is in place on the daily chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,600.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,530.00. First resistance is seen at $1,585.00 and then at today’s high of $1,590.90. First support is seen at today’s low of $1,562.30 and then at $1,556.50—the bottom of today’s upside price gap on the daily bar chart. Wyckoff's Market Rating: 8.5
March silver futures bulls have the firm overall near-term technical advantage as a price uptrend line is 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 at $18.75. Next support is seen at today’s low of $18.17 and then at $18.00. Wyckoff's Market Rating: 7.0.