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Gold, silver prices weaker following upbeat ADP jobs report

Kitco News

(Kitco News) - Gold and silver prices have lost their mild overnight gains are modestly lower in early U.S. futures trading Wednesday. Still, gold bulls are having a very good week amid renewed safe-haven demand in a still very uncertain and anxious global marketplace at mid-week. April gold futures were last down $5.70 an ounce at $1,638.60. May Comex silver prices were last down $0.013 at $17.17 an ounce.

The just-released ADP national employment report for February showed a rise of 183,00 jobs, which was higher than the expected rise of 155,000. Gold and silver prices did back off after that upbeat report, and amid a U.S. stock market that is expected to open sharply higher.

Global stock markets were mixed to firmer overnight, following the big sell off in the U.S. stock market Tuesday. Look for another active day in U.S. markets.

The global marketplace on Wednesday is still digesting the surprise 0.5% interest rate cut delivered by the U.S. Federal Reserve on Tuesday morning. That move, at least initially, roiled the U.S. stock market and, importantly, sent the yield on the benchmark 10-year U.S. Treasury note plummeting to a record low, below 1.0%. Wednesday morning the yield on the 10-year note yield had rebounded and was trading around 1.0%. Veteran market watchers are taking a very dim view of the drop in U.S. Treasury yields, as it is a signal of impending U.S. and/or global economic recession. It’s also suggestive of potential consumer and commercial price deflation. Deflation is the archenemy of many markets, including raw commodities.

Part of the rebound in the U.S. stock market overnight is likely due to former U.S. Vice President Joe Biden’s strong performance in the “Super Tuesday” Democratic presidential primaries. Biden’s solid showing dented socialist-leaning candidate Senator Bernie Sanders’ momentum. Most agree the U.S. stock market would not like a Sanders presidency.

Meantime, the Covid-19, or coronavirus, outbreak continues to spread worldwide and especially outside of China. There are anecdotal reports of consumer hoarding of basic goods in the U.S. The outbreak is being perceived by analysts and economists as seriously denting world economic growth, at least for a short period of time, or maybe not so short. More central banks are expected to soon announce they are easing their monetary policies to help thwart the negative economic impacts of the outbreak, following the U.S. and Australian moves earlier this week.

In overnight news, China’s private Caixin purchasing managers index (PMI) February showed a manufacturing reading of 40.3 versus 51.1 in January and 46.0 forecast. The Caixin services PMI was 26.5 versus 51.8 in January and 48.0 forecast. The Caixin composite PMI was 27.5 compared to 51.9 in January. Hong Kong’s Markit PMI came in at 33.1 in February, down from 46.8 in January and marked the steepest drop since at least 1998, when the survey began. The Euro zone February composite PMI was reported at a better-than-expected 52.6 versus 51.3 in January. A reading below 50.0 suggests contraction in the sector.

The key outside markets today see Nymex crude oil prices higher and trading around $47.75 a barrel in early trading. The U.S. dollar index is trading up today following recent strong selling pressure.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI and the weekly DOE liquid energy stocks report.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls have the solid overall near-term technical advantage amid a 3.5-month-old price uptrend on the daily chart. A drop below last week’s low of $1,564.00 would negate the price uptrend. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at the February high of $1,691.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,564.00. First resistance is seen at the overnight high of $1,654.30 and then at $1,662.50. First support is seen at the overnight low of $1,632.60 and then at $1,625.00. Wyckoff's Market Rating: 7.0

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures bears still have the overall near-term advantage. 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 $16.00. First resistance is seen at this week’s high of $17.48 and then at $17.75. Next support is seen at $17.00 and then at Tuesday’s low of $16.665. Wyckoff's Market Rating: 4.0.

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.