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Gold prices up as global markets rocked by crash in crude oil

Kitco News

(Kitco News) - Gold prices are moderately higher in volatile early U.S. futures trading Monday, after hitting a seven-year high above $1,700.00 overnight. Risk aversion is very high to start the trading week. Global stock markets are melting down, while currency and commodity markets are in turmoil. The e-mini S&P stock index futures are locked limit down in overnight trading, which overnight prompted some selling pressure in gold due to the old trading adage that during keen market turmoil, when traders can’t sell what they want they sell what they can. April gold futures were last up $8.10 an ounce at $1,680.50. May Comex silver prices were last down $0.313 at $16.95 an ounce.

Global stock, commodity and financial markets were jolted overnight following the weekend news that Saudi Arabia said it would drastically lower its crude oil prices and pump more crude oil following a failed OPEC meeting in which Russia refused to lower its crude production. Nymex crude oil prices fell to a four-year low of $27.34 a barrel overnight before coming off those lows but still trading down nearly $9.00 a barrel at around $32.50. The one-day loss in crude oil prices is the biggest in almost 30 years, dating back to the 1991 first gulf war.

Global stock markets sold off sharply overnight and the U.S. stock index futures are pointed toward sharply lower to limit-down price moves when the New York day session opens.

The benchmark 10-year U.S. Treasury note saw its yield dive to a record low of 0.387% overnight, and its currently trading around 0.5%. The U.S. 30-year Treasury bond’s yield dropped below 1.0% overnight. U.S. Treasury bond futures overnight at one point saw prices trade over 13 points higher. For perspective, a one-point move in T-Bond prices (32/32) is normally consider a big move.

The U.S. dollar index is trading lower and hit a 13-month low overnight. The Japanese yen has soared on the foreign exchange market, while the Australian dollar plunged in value.

The Saudi-Russia oil-price war is the second shock to hit the global marketplace this year, as traders and investors are still dealing with the high anxiety of the coronavirus, or Covid-19 outbreak that continues to spread. Reports over the weekend said half of Italy is on lockdown, while more cases and deaths have been reported in the U.S. The state of New York has declared a state of emergency because of the outbreak. Business events in the U.S. are now being cancelled and some companies have banned employee travel on airlines.

More and more, it appears the global economy is spiraling into recession and a bear market in equities. Young investors have never experienced a bear market in stocks, which will especially unnerve them. Look for the major central banks to take more action—possibly as soon as Monday—to try to mitigate the collapsing stock markets and assuage very shaky consumer confidence.

The silver market is getting hit Monday, along with many other raw commodity markets, amid the collapse in crude oil prices and notions of global economic recession crimping industrial demand for silver. The specter of consumer and commercial price deflation is also curtailing buying interest in the precious metals markets.

U.S. economic data due for release Monday is light and includes the employment trends index.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls have the strong overall near-term technical advantage amid a 3.5-month-old price uptrend on the daily chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $1,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00. First resistance is seen at the overnight high of $1,704.30 and then at $1,725.00. First support is seen at the overnight low of $1,658.00 and then at $1,650.00. Wyckoff's Market Rating: 8.5.

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures bulls and bears are on a level overall near-term technical playing field amid choppy trading recently. 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 February low of $16.40. First resistance is seen at $17.25 and then at the overnight high of $17.615. Next support is seen at the overnight low of $16.55 and then at $16.40. 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.