Gold prices power to 7.5-year high; more upside likely
(Kitco News) - Gold prices are trading up in early U.S. trading Tuesday after spiking to a 7.5-year high of $1,742.60 an ounce in overnight trading, basis June Comex futures. Meantime, silver prices pushed solidly higher and hit a three-week high of $15.93 overnight, basis May Comex futures. The precious metals are boosted early this week on ideas the coronavirus outbreak may be de-escalating. June gold futures were last up $8.50 an ounce at $1,702.30. May Comex silver prices were last up $0.446 at $15.615 an ounce.
The safe-haven metals bulls appear to have found their sweet spot early this week, as the Covid-19 situation has moved from panic to stabilization, which is encouraging buyers to step back into many markets, including the metals. However, the matter is still dire and the eventual outcome still uncertain enough to prompt safe-haven demand for gold and silver. It could also be that metals traders are looking over the horizon and anticipating problematic price inflation, what with all the money being pumped into the financial system by the major central banks of the world. Economics 101 professors have been teaching for decades that when central banks pump lots of money into the financial system, the specter of increasing inflation is very likely.
Global stock markets were mostly higher in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. So far this week the global marketplace is more upbeat, as it appears the coronavirus outbreak that has crippled the global economy is de-escalating in Europe and the U.S. Some models are predicting infections in the U.S. and U.K. will peak in a week. The situation is by no means a good one at present but may be considered by traders and investors to not be as bad as some had been expecting. Also, health officials are stressing the Covid-19 outbreak could again escalate. British Prime Minister Boris Johnson has the illness and has been moved to an intensive care unit.
Japan has just announced an economic stimulus package totaling $1 trillion, to combat the economic damage inflicted by the coronavirus.
The well-known big hedge fund manager Bill Ackman, who three weeks ago gave an emotional TV interview and said “hell was coming” regarding Covid-19, has now tweeted the situation appears to be getting better.
If the Covid-19 outbreak continues to de-escalate, debate will intensify on when to restart the global economies. One respected Washington, D.C.-based analyst/economist is predicting President Trump will restart the U.S. economy on May 1. Trump has been saying for some time that “the cure cannot be worse than the disease.”
The important outside markets today see Nymex crude oil prices higher and trading around $27.15 a barrel. There are reports Russia and Saudi Arabia are close to a deal to cut their crude oil production levels. OPEC officials will meet via a conference call on Thursday to discuss production cuts. The U.S. dollar index is lower this morning on a corrective pullback from recent good gains. The 10-year U.S. Treasury note yield is trading around 0.74% Tuesday morning, well up from recent levels and also suggesting less anxiety in the marketplace. Gold prices are higher and hit a 7.5-year high of $1,724.40 overnight.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the IDB/TIPP economic optimism index, and consumer credit.
Technically, the gold bulls have the solid overall near-term technical advantage amid a price uptrend in place on the daily, weekly and monthly charts. That strongly suggests the path of least resistance for prices will remain sideways to higher for at least the near term and probably longer. Bulls’ next upside price objective is to produce a close in June 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 $17.25 and then at the overnight high of $1,742.60. First support is seen at the overnight low of $1,689.00 and then at $1,675.00. Wyckoff's Market Rating: 8.5
May silver futures bulls have gained the overall near-term technical advantage and prices are now trending higher on the daily bar chart. 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 $14.00. First resistance is seen at the overnight high of $15.93 and then at $16.00. Next support is seen at the overnight low of $15.27 and then at $15.00. Wyckoff's Market Rating: 6.0.