Why gold, silver prices seeing pressure amid global equities meltdown

(Kitco News) - Gold and silver prices are posting solid losses in early U.S. futures trading Friday. The safe-haven metals bulls are confounded their markets cannot catch a bid amid the very keen risk aversion in the marketplace that sees world stock and financial markets in turmoil. There is an old saying in trading markets that when times get really dire and anxiety is high, you don't sell what you want, you sell what you can. Such is likely part of the reason safe-haven gold has seen downside price pressure this week. Also, remember that gold's price is mostly driven by consumer demand. China is a leading gold consumer, and the coronavirus outbreak's negative impact on the Chinese economy is most certainly going to crimp Chinese citizens' purchases of gold and silver. Silver this week is getting hit especially hard on ideas both commercial and consumer demand for the metal will be dented by slowing world economic growth. Still, the gold bulls remain in firm near-term technical control amid a price uptrend in place on the daily bar chart and prices are still not that far below Monday’s seven-year high. April gold futures were last down $19.00 an ounce at $1,623.40. March Comex silver prices hit a nine-week low overnight and were last down $0.623 at $17.035 an ounce.

Global stock markets were solidly lower again Friday, the last trading day of the month, as the coronavirus outbreak continues to grip the global marketplace and is causing keen trader and investor anxiety. Here are just a few of the economic ramifications of the coronavirus outbreak, according to reports: China ports are seeing container ship calls down 30% from last year. Oil shipments to China from the Middle East are down 88% from last year’s February deliveries. The International Energy Agency forecasts oil demand to fall by 435,000 barrels a day in the first quarter--the first contraction in 10 years. U.S. stock indexes are pointed toward sharply lower openings and at multi-month lows when the New York day session begins.

Do not be surprised if, as soon as today, the major central banks of the world issue a joint statement declaring they stand ready to stimulate economies by easing their monetary policies, if the coronavirus scare continues to roil the markets. How the marketplace would interpret such a declaration is unclear. It could make market participants even more panicky.

The yield on the benchmark U.S. Treasury 10-year note has dropped to a record low of
1.17%. The 10-year German bond (bund) yield hit a five-month low of -0.616%. What the U.S. Treasury market is telling traders and investors this week is that serious economic damage will be inflicted by the coronavirus—both at home and abroad, including the possibility of a U.S. recession on the horizon. Europe’s economy stands to be hurt even worse by the outbreak.

Nymex crude oil prices solidly lower, at a 14-month low, and trading around $45.50 a barrel in early trading Friday. The U.S. dollar index is trading solidly down again today, as currency traders focus on the coronavirus prompting the Federal Reserve to lower interest rates as soon as March. President Donald Trump also bashed the Fed again this week and implied he wants a weaker greenback. The U.S. dollar, like, gold is a safe-haven asset, but both assets are feeling pressure late this week on the concerns associated with slowing economic growth. There’s an old saying that during an extremely anxious marketplace, traders don’t’ sell what they want, they sell what they can. Such is likely the case for gold this week.

U.S. economic data due for release Friday includes the advance economic indicators report, personal income and outlays, the Chicago ISM business survey, and the University of Michigan consumer sentiment survey.

Technically, the gold bulls have the firm overall near-term technical advantage. A 3.5-month-old price uptrend is still 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 $1,630.00 and then at $1,640.00. First support is seen at the overnight low of $1,619.10 and then at $1,610.00. Wyckoff's Market Rating: 7.0

March silver futures bears have gained the overall near-term advantage amid this week’s steep downdraft. Silver bulls' next upside price objective is closing prices above solid technical resistance at $18.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the December low of $16.565. First resistance is seen at $17.25 and then at $17.50. Next support is seen at $16.75 and then at $16.565. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

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jwyckoff@kitco.com

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