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Gold gains on safe-haven demand as U.S. stock market slumps

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(Kitco News) - Gold prices are solidly higher in midday trading Thursday, but down from the sharp gains seen in morning trading. Safe-haven demand is featured late this week amid a global marketplace that has become anxious again—evidenced by a daily meltdown in the U.S. stock market Thursday. The Federal Reserve on Wednesday afternoon doused a stock market rally with some dour forecasts for the U.S. economy. There are also renewed worries about a Covid-19 infection resurgence. August gold futures were last up $17.00 an ounce at $1,737.80. July Comex silver prices were last up $0.054 at $17.855 an ounce.

Gold also received a little upside bump Thursday morning when well-known market watcher Jim Grant, when asked on CNBC about which markets to invest, said gold and silver.

Global stock markets were also mostly lower in overnight trading. Risk aversion has returned to the marketplace following a wake-up call delivered by the Federal Reserve following its two-day FOMC meeting Wednesday afternoon. The Fed made no changes in U.S. monetary policy but leaned dovish, saying the U.S. economy could take years to fully recover from its recent damage inflicted by the Covid-19 pandemic. The central bank also painted a bleak picture of the present state of the U.S. economy, including forecasting U.S. GDP at minus 6.5% this year and unemployment above 9% by the end of the year. Those numbers were not a shock to the marketplace, but a grim reminder to traders and investors who had just pushed the Nasdaq stock index to a new record high Wednesday morning and the S&P 500 to a three-month high Monday.

Said one market analyst in an email dispatch Thursday morning: “The Fed is now committed to keeping interest rates near zero until at least the end of 2022 and using all its tools to support the economy. This could translate into further speculative bets and push the rally in equities and corporate debt higher. However, without real economic recovery the market will have to deal with a more significant challenge, which is debt insolvency. That’s why the disconnect between asset performance and economic fundamentals cannot run forever and investors will need to become more rational with their investment approach.” 

There are also growing worries in the global marketplace about a “second wave” of the Covid-19 pandemic hitting many countries. There is some evidence such may be occurring in some regions of some countries, including the U.S.

The important outside markets see the U.S. dollar index higher on a bounce after hitting a three-month low Wednesday. The greenback is in a serious swoon. Meantime, Nymex crude oil prices are sharply lower on a corrective pullback after hitting a three-month high above $40.00 Monday, and are trading around $36.25 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.67% level.

Live 24 hours gold chart [Kitco Inc.]

Technically, August gold futures prices were nearer the session low at midday after posting strong gains earlier. The bulls have the solid overall near-term technical advantage and have negated a near-term price downtrend. Gold bulls' next upside near-term price objective is to produce a close above solid technical resistance at $1,761.00. Bears' next near-term downside price objective is pushing prices below solid technical support at $1,700.00. First resistance is seen at today’s high of $1,754.90 and then at $1,761.00. First support is seen at today’s low of $1,727.50 and then at Wednesday’s low of $1,714.10. Wyckoff's Market Rating: 7.5

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures were down a bit at midday today. Prices were near the session low and lost strong early gains. The silver bulls have the firm overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at the February high of $19.075 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.00. First resistance is seen at $18.00 and then at this week’s high of $18.405. Next support is seen at this week’s low of $17.495 and then at last week’s low of $17.375. Wyckoff's Market Rating: 7.0.

July N.Y. copper closed down 700 points at 258.65 cents today. Prices closed nearer the session low today on heavy profit taking after hitting a 4.5-month high Wednesday. The copper bulls still have the firm overall near-term technical advantage. Prices are in an 11-week-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 275.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 250.00 cents. First resistance is seen at 265.00 cents and then at this week’s high of 270.00 cents. First support is seen at this week’s low of 253.05 cents and then at 250.00 cents. Wyckoff's Market Rating: 6.5.

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.