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Gold prices soar after very aggressive Fed stimulus expansion

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(Kitco News) - Gold and silver prices are trading sharply up in early U.S. trading Monday. Prices shot from modestly higher levels overnight to sharp gains following an announcement from the Federal Reserve that the U.S. central bank will very aggressively buy more securities, including mortgage-backed, and also open up “main street” lending facility. The Fed used the term “unlimited” on amounts it will spend. U.S. stock indexes also shot above unchanged price levels on the day after trading sharply lower before the Fed news. April gold futures were last up $37.80 an ounce at $1,522.00. May Comex silver prices were last up $0.50 at $12.89 an ounce.

Global stock markets were lower in overnight trading. U.S. stock index futures are presently pointed toward higher openings when the New York electronic day session begins. The New York Stock Exchange, itself, is now closed. When the markets opened electronically Sunday, U.S. stock indexes were locked limit down. The U.S. Congress over the weekend failed to agree on a financial aid package for U.S. businesses and citizens, which was being blamed for the even more dour marketplace mood to start the trading week—until the surprise Fed announcement just a short while ago.

The Covid-19 outbreak continues to spread worldwide, with the U.S. economy shutting down even further as many states, including New York and California, have been locked down by their governors. Focus in the U.S. is on a shortage of medical supplies. Local health officials are now asking for the public to donate any supplies such as masks and gloves that they have at home. U.S. Senator Rand Paul has been diagnosed with Covid-19. Over the weekend much of the American public came to the stark realization the U.S. is not going to remain on lockdown for just a couple weeks, but instead for a period likely at least twice that long and probably even longer. China-U.S. relations are becoming more strained as President Trump now refers to Covid-19 as the “China virus,” which has angered the Chinese people.

Following is an edited email dispatch from a market analyst Monday morning: “U.S. economic growth estimates from the biggest investment banks are becoming increasingly dire. Last week, J.P. Morgan expected GDP to shrink 14% in the second quarter of this year, Goldman Sachs sees a 24% fall, while the latest forecast by Morgan Stanley is even gloomier, anticipating a 30% drop. However, the worst projections are coming from a well-respected Fed official, James Bullard, who said unemployment may hit 30% and GDP decline 50% in the second quarter. Within the next couple of weeks, we will get to know how severe the upcoming economic crisis will be. The scariest scenario is that it turns into a credit crisis which will break the financial system.”

The important outside markets today see Nymex crude oil prices firmer and trading around $23.00  a barrel. The U.S. dollar index is lower after hitting a three-year high overnight. The 10-year U.S. Treasury note yield has dropped to around 0.8% Monday after trading above 1.0% last week.

U.S. economic data due for release Monday is light and includes the Chicago Fed national activity index.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bears still have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $1,550.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the March low of $1,450.90. First resistance is seen at $1,535.00 and then at $1,550.00. First support is seen at $1,500.00 and then at the overnight low of $1,484.60. Wyckoff's Market Rating: 3.5

Live 24 hours silver chart [ Kitco Inc. ]

May silver futures bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $13.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $11.00. First resistance is seen at $13.23 and then at $13.50. Next support is seen at the overnight low of $12.29 and then at $12.00. Wyckoff's Market Rating: 2.0.

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