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Gold, silver prices up as risk aversion back in play

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(Kitco News) - Gold and silver prices are higher in early U.S. trading Thursday, on safe-haven demand amid a global marketplace that has become anxious again. The Federal Reserve on Wednesday afternoon doused a stock market rally with some dour forecasts for the U.S. economy. August gold futures were last up $13.00 an ounce at $1,733.70. July Comex silver prices were last up $0.269 at $18.065 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 mostly lower in overnight trading. U.S. stock indexes are pointed toward solidly lower openings when the New York day session begins. 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 firmer on a bounce after hitting a three-month low Wednesday. The greenback is in a serious swoon. Meantime, Nymex crude oil prices are lower on a corrective pullback after hitting a three-month high above $40.00 Monday, and are trading around $38.50 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.7% level. Gold is solidly up Thursday morning and bulls are having a good week as safe-haven demand has returned to the marketplace.

U.S. economic data due for release Thursday includes the weekly jobless claims report and the producer price index. Jobless claims in the latest reporting week are seen up 1.6 million.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls are having a very good week as they have negated a price downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $1,761.00. 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 $1,749.80 and then at $1,761.00. First support is seen at the overnight low of $1,727.50 and then at Wednesday’s low of $1,714.10. Wyckoff's Market Rating: 7.0

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures 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 this week’s high of $18.39 and then at $18.50. Next support is seen at Wednesday’s low of $17.685 and then at this week’s low of $17.495. Wyckoff's Market Rating: 7.0.

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.