Gold, silver slump as risk appetite soars on Covid vaccine news
(Kitco News) - Gold and silver futures prices are sharply down at midday U.S. trading Monday. Gold hit a 3.5-month low after hitting a seven-week high overnight. News from Pfizer that it has developed a very promising Covid-19 vaccine spiked up risk appetite in the marketplace. Stock markets soared on the news, including U.S. indexes hitting record highs. The metals markets were also hit by a solid rally in the U.S. dollar index today. December gold futures were last down $92.50 at $1,859.40 and December Comex silver was last down $1.887 at $23.775 an ounce.
Pfizer this morning announced a Covid-19 vaccine trial of around 44,000 subjects that is 90% effective gave the stock markets a strong boost from earlier overnight gains. It seems this is finally the good news the global marketplace had been awaiting for months—during a grim period when the pandemic appears to be worsening in places like the U.S. and Europe.
From a longer-term perspective, it’s my bias that gold and silver markets have just hit a speed bump with today’s selling pressure, which could last a bit longer. It could well be that the apparently successful Covid-19 vaccine will prompt faster and stronger economic recoveries in the coming months—but not before more stimulus from major governments will be needed to get through a still dark winter period in the Northern Hemisphere that will still see significant Covid-19 economic damage inflicted. All of the above add up to higher odds for problematic price inflation occurring in the months ahead, which would be bullish for raw commodity markets, including the metals. It’s hard to fathom that all of the central bank monetary policy stimulus, including most Americans getting $1,250 checks in the mail a few months ago, will not go without a reckoning.
The U.S. dollar index is solidly higher today after hitting a nine-week low overnight. The other important outside market sees crude oil prices sharply higher and trading around $40.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note has risen today is currently fetching 0.82%.
The marketplace overnight was calmer to start the trading week. Joe Biden was declared the winner of the U.S. presidential election on Saturday, and it appears his margin of victory is growing by the day, as the ballot-counting continues. The marketplace still reckons control of the U.S. Congress will be split, with Democrats having the majority in the House of Representatives and the Senate tilting slightly to the Republicans—even though there is a chance the Democrats could take the Senate due to still-contested Senate seats. Stock markets tend to like gridlock and no major shifts in fiscal policy.
While the specter of more U.S. government regulation of businesses under a Biden administration is a negative for the stock market, that is being offset by notions Biden will be a more stable force on the U.S. global policy front. The Chinese yuan hit a more-than-two-year high Monday on ideas the U.S.-China relations will improve under Biden.
Technically, December gold futures prices scored a big and bearish “outside day” down on the daily bar chart today. The gold bulls have faded quickly this week but still have the overall near-term technical advantage. Prices did drop below what was strong support at the September low of $1,851.00, which does suggest some more price pressure in store for the near term. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,875.00 and then at $1,900.00. First support is seen at today’s low of $1,848.00 and then at $1,825.00. Wyckoff's Market Rating: 6.0
December silver futures prices scored a bearish outside day down today after hitting a seven-week high overnight. Silver futures bulls still have the overall near-term technical advantage but faded badly today. Silver bulls' next upside price objective is closing prices above solid technical resistance at today’s high of $26.135 an ounce. The next downside price objective for the bears is closing prices below solid support at the September low of $21.81. First resistance is seen at $24.00 and then at $24.50. Next support is seen at today’s low of $23.60 and then at $23.26. Wyckoff's Market Rating: 6.0.
December N.Y. copper closed up 20 points at 315.60 cents today. Prices closed nearer the session low today. The copper bulls have the solid overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the October high of 321.80 cents. The next downside price objective for the bears is closing prices below solid technical support at 290.00 cents. First resistance is seen at 321.80 cents and then at 325.00 cents. First support is seen at 310.00 cents and then at 306.00 cents. Wyckoff's Market Rating: 8.0.