Gold, silver prices see normal corrective pullbacks from recent gains
(Kitco News) - Gold and silver futures prices are trading solidly lower in early U.S. trading Wednesday, on normal downside corrections from recent strong gains that saw gold prices hit a 7.5-year high, at $1,788.80, on Tuesday, basis June Comex futures. Bulls in both metals are still enjoying the firm technical advantage on the charts. June gold futures were last down $20.40 an ounce at $1,748.60. May Comex silver prices were last down $0.45 at $15.68 an ounce.
Global stock markets were mixed to lower in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins. The U.S. stock indexes are seeing downside corrections following recent good gains that have pulled them out of bear market territory (retracing over 50% of their recent declines). Lower crude oil prices that today see Nymex crude oil prices around $19.50 a barrel and hitting an 18.5-year low overnight are helping to pressure the stock markets today. The International Energy Agency (IEA) said in a report today that no “feasible” amount of crude oil production cuts can offset the demand destruction caused by Covid-19.
It can be argued that the recent gains in stock indexes are due in part to a battered raw commodity sector, led by crude oil’s descent, that has seen investor money flow out of hard assets and back into paper assets—equities and bonds. Gold is the outlier in the beleaguered raw commodity sector, as the yellow metal’s price this week rose to a 7.5-year high on safe-haven demand.
The International Monetary Fund on Tuesday warned the Covid-19 pandemic will slow global economic growth to the slowest since the Great Depression of the 1930s. The IMF forecast -6.6% economic contraction for advanced economies. The IMF forecast GDP growth returning to 5.8% in 2021. The agency estimates global the Covid-19 pandemic will peak in the second quarter and fade away in the second half of 2020. However, if the pandemic continues through the third quarter then such could knock another 3% off global economic growth. A second coronavirus outbreak in 2021 could lop another 5% off the global GDP growth for 2021.
The U.S. dollar index is higher this morning on a corrective rebound from recent selling pressure. The 10-year U.S. Treasury note yield is trading around 0.73% this morning.
U.S. economic reports due for release Wednesday includes the weekly MBA mortgage applications survey, the Empire State manufacturing survey, retail sales, industrial production and capacity utilization, the NAHB housing index, manufacturing and trade inventories, the weekly DOE liquid energy stocks report, Treasury international capital data and the Federal Reserve’s beige book.
Technically, the gold bulls have the strong overall near-term technical advantage amid price uptrends 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 $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at the overnight high of $1,759.80 and then at $1,772.80. First support is seen at the overnight low of $1,731.60 and then at this week’s low of $1,724.20. Wyckoff's Market Rating: 8.0
May silver futures bulls have the overall near-term technical advantage and prices are trending higher on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.50. First resistance is seen at $16.00 and then at this week’s high of $16.30. Next support is seen at this week’s low of $15.385 and then at $15.25. Wyckoff's Market Rating: 6.0.