Gold, silver see big pullbacks after recent bigger gains; not surprising
(Kitco News) - Gold and silver futures prices are trading solidly lower in midday 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. Big gains in markets can also produce big, normal corrective pullbacks in still-strong price uptrends. Bulls in both metals are still enjoying the firm technical advantage on the charts. June gold futures were last down $28.20 an ounce at $1,740.70. May Comex silver prices were last down $0.585 at $15.545 an ounce.
Global stock markets were mixed to lower in overnight trading. U.S. stock indexes are solidly lower at midday following some very downbeat, although not unexpected, U.S. economic data released Wednesday morning. The U.S. stock indexes are also 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 $19.75 a barrel and hitting an 18.5-year low overnight are helping to pressure the metals and 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.
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.
Technically, June gold futures bulls still have the strong overall near-term technical advantage. More upside is likely in the near term. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,800.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,700.00. First resistance is seen at today’s high of $1,759.80 and then at this week’s high of $1,788.80. First support is seen at today’s 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 still have the overall near-term technical advantage. Prices are in a four-week-old uptrend 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: 6.5.
May N.Y. copper closed down 325 points at 229.70 cents today. Prices closed near mid-range today on a corrective pullback from recent good gains. The copper bulls have the slight overall near-term technical advantage. A price uptrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 250.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 220.00 cents. First resistance is seen at this week’s high of 235.25 cents and then at 238.00 cents. First support is seen at this week’s low of 226.35 cents and then at 225.00 cents. Wyckoff's Market Rating: 5.5.