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Gold prices pull back from strong gains Tuesday

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(Kitco News) - Gold prices are trading solidly down in early U.S. trading Wednesday, on a corrective pullback from the strong gains seen on Monday and Tuesday. Look for more daily high volatility in the metals markets in the coming days. April gold futures were last down $29.80 an ounce at $1,631.00. May Comex silver prices were last up $0.008 at $14.265 an ounce.

Global stock markets were mostly higher in overnight trading. U.S. stock index futures are presently pointed toward lower openings when the New York electronic day session begins. The equity markets may be buoyed today by news the U.S. Congress has agreed to a $2 trillion financial aid package for U.S. businesses and citizens so negatively impacted by the Covid-19 outbreak. News reports said the U.K.’s Prince Charles has tested positive for Covid-19.

Given Tuesday’s record daily gains in the U.S. stock indexes, many traders and investors are now wondering if the bottoms are in place for the U.S. stock indexes, which dropped into bear market territory at the fastest rate ever over the past three weeks. Some of the big shots on the TV business news channels are saying “not yet. It’s too early.” Those big shot TV commentators being in general agreement on that matter makes at least a few long-time market watchers think they might be wrong, because they usually are.

Metals traders are still buzzing about the wild price action in the gold futures and London cash (spot) market Tuesday. April Comex gold futures shot sharply higher Tuesday morning amid keen trader concern that London spot gold price quotes had become unreliable or had been halted. U.K. market-makers had ostensibly shut down as gold mines around the globe have curtailed operations due to the Covid-19 outbreak. With the U.K. government-ordered lock-down, many gold market makers were working from home Tuesday, creating even more confusion. The big gold traders in Europe who normally would base their trading decisions on the London spot gold price got spooked when the London spot price was “way out of whack” to the gold futures price—at as much as a $100.00 discount to Comex gold futures at one point early Tuesday morning. The confusion in the London spot market prompted the big European metals traders to rush to buy Comex gold futures as a hedge, as they felt they could not get what they felt were accurate or fair London spot gold prices. Also, there have been many reports the supply of physical gold bullion worldwide is hard to come by. That led to ideas Comex futures traders long (buyers) the gold market in the nearby contracts could hold their positions into expiration of those contracts and thereby take delivery of physical gold, per futures contract specifications. The credibility of this notion was bolstered late Tuesday evening when the London Bullion Market Association (LBMA) and major banks asked CME Group (parent company for Comex) to change physical delivery specifications for gold futures contracts to allow 400-ounce bars of gold, which is the standard for London traders. Currently, CME only allows 100-ounce bars to be delivered. Then later Tuesday evening the CME Group came out and announced a whole new gold futures contract was created, which would allow both 400-ounce and 100-ounce bars acceptable for delivery. The new gold futures contract, if approved by regulators, would start to trade in a few weeks. The upshot of this matter for all traders of all markets is that the London spot gold market had operated efficiently for over 150 years—until Tuesday. Such are the times we are experiencing at present.

The important markets today see Nymex crude oil prices slightly down and trading around $23.65  a barrel. The U.S. dollar index is sharply lower again after hitting a 17-year high on Monday. The 10-year U.S. Treasury note yield is trading around 0.85% Wednesday.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders, the weekly DOE liquid energy stocks report and the monthly house price index.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls have the overall near-term technical advantage with this week’s big gains. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at the March high of $1,704.30. Bears' next near-term downside price objective is pushing futures prices below solid technical support at Tuesday’s low of $1,560.50. First resistance is seen at $1,650.00 and then at $1,665.00. First support is seen at the overnight low of $1,615.20 and then at $1,600.00. Wyckoff's Market Rating: 6.5

Live 24 hours silver chart [ Kitco Inc. ]

May silver futures bears still have the slight overall near-term technical advantage but this week’s gains and a bullish V-bottom reversal pattern on the daily chart suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at $16.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the March low of $11.64. First resistance is seen at the overnight high of $14.895 and then at $15.00. Next support is seen at $14.00 and then at $13.50. Wyckoff's Market Rating: 4.5.

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.