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Gold prices down as focus shifts to consumer demand for metals

Kitco News

(Kitco News) - Gold and silver prices are down in early U.S. futures trading Wednesday, as it appears the bearish aspect of reduced consumer demand for the precious metals amid the potential for a slowdown in global economic growth is presently trumping the safe-haven demand aspects of the coronavirus scare. China, which is hit hardest by the outbreak, is a world leader for consumer gold demand. It can also be correctly argued the gold market is seeing a corrective pullback from recent solid gains that pushed prices to a seven-year high earlier this week. April gold futures were last down $5.90 an ounce at $1,644.10. March Comex silver prices were last down $0.241 at $17.95 an ounce.

Global stock markets were lower overnight as the coronavirus outbreak and its expected human toll and negative world economic fallout continue to intensify. There is no consensus on how or when this situation will wind up playing out. That suggests turmoil in the markets will continue in varying degrees until some kind of end-game for the matter is expected by the majority of market watchers. U.S. stock indexes are pointed toward mixed openings when the New York day session begins. The DJIA on Monday and Tuesday saw its largest two-day drop in history, points-wise. The S&P 500 futures hit a three-month low overnight.

The U.S. Center for Disease Control officials at a press conference on Tuesday afternoon said of the outbreak: “This might be bad.” The CDC said the Covid-10 illness is going to spread in the U.S. The outbreak continues to spread in Asia and Europe.

In a sign of the keen trader and investor anxiety in the global marketplace at present, the yield on the benchmark U.S. Treasury 10-year note on Tuesday fell to a record low close of 1.328%. On Wednesday the yield traded as low as 1.312%. Gold is near steady Wednesday after falling sharply Tuesday. The big drop in gold prices Tuesday could be tied to notions of less consumer demand for the metal as global economic growth is dinged by the coronavirus outbreak. China, where the illness has hit hardest, is a leading consumer of gold.

The key outside markets today see Nymex crude oil prices lower, at a nearly 14-month low, and trading around $49.00 a barrel. Brent crude is also trading near a 14-month low. Meantime, the U.S. dollar index is higher today.  

Financial and currency markets this week are pricing in expected future easing of monetary policies by the major central banks of the world, as traders reckon the coronavirus, or covid-19, illness will prompt the central banks to stimulate their economies to help ward off the negative economic impacts of the outbreak.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential sales and the weekly DOE liquid energy stocks report.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls still have the solid overall near-term technical advantage. A 3.5-month-old price uptrend is in place on the daily chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at this week’s high of $1,691.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at the overnight high of $1,657.10 and then at Tuesday’s high of $1,666.70. First support is seen at the overnight low of $1,636.50 and then at this week’s low of $1,627.00. Wyckoff's Market Rating: 7.5.

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures bulls have lost their overall near-term technical advantage with Tuesday’s sharp losses. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at the January high of $18.895 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the January low of $17.28. First resistance is seen at the overnight high of $18.17 and then at $18.375. Next support is seen at this week’s low of $17.82 and then at $17.50. Wyckoff's Market Rating: 5.0.

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 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.