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Downside price action in gold, silver, after Monday's frenzy

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(Kitco News) - Gold and silver futures prices are trading sharply lower in early U.S. trading Tuesday, with silver leading the way. It appears the attempted short-squeeze in the silver market has failed, at least at this point. Rallying global equity markets early this week are a bearish element for the safe-haven metals. April gold futures were last down $19.70 at $1,844.00 and March Comex silver was last down $1.718 at $27.72 an ounce.

Silver’s big pullback from Monday’s eight-year high of $30.35 in March silver futures suggests retail trader efforts to produce a short squeeze have failed—at least for the moment. The big jump in silver futures caught the attention of the Commodity Futures Trading Commission (CFTC), with acting Chairman Rostin Behnam saying the futures regulator is “closely monitoring” the activity. “The Commission is communicating with fellow regulators, the exchanges, and stakeholders to address any potential threats to the integrity of the derivatives markets for silver and remains vigilant in surveilling these markets for fraud and manipulation,” he stated. The Comex did raise trading margins on silver futures this week.

Global stock markets were mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins and have made strong recoveries after the recent declines. Traders and investors are more upbeat this week on news that the Covid-19 pandemic, while still gripping many countries, is showing some signs of peaking in the U.S. and Europe as vaccines continue to be distributed to populations, but not without some serious bottlenecks. Also, marketplace attention is on a new pandemic relief package that is likely to pass the U.S. Congress in the coming weeks. It also appears the GameStop and “Redditor” trade saga has died down, at least for now, as the marketplace again focuses on corporate earnings reports and upcoming economic data that includes Friday’s U.S. employment situation report.

In other overnight news, the Euro zone economy contracted 0.7% in the fourth quarter and  shrunk 5.1%, year on year. Those numbers were just a bit better than expected, however.

The key “outside markets” today see the U.S. dollar index higher and hitting a seven-week high overnight. Importantly, the USDX is now trending higher on a near-term basis and some of the major currency futures markets are now in fledgling near-term price downtrends, while others have at least seen their price uptrends stall. Meantime, Nymex crude oil futures prices are solidly higher, hit a more-than-12-month high overnight and trading around $55.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note stands at 1.10%.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the ISM New York report on business, the IDB/TIPP economic optimism index and domestic auto industry sales.

Live 24 hours gold chart [Kitco Inc.]

Technically, the February gold futures bulls and bears are back on a level overall near-term technical advantage playing field amid the recent choppy trading. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the January low of $1,804.70. First resistance is seen at the overnight high of $1,866.30 and then at last week’s high of $1,878.90. First support is seen at the overnight low of $1,840.00 and then at last week’s low of $1,832.40. Wyckoff's Market Rating: 5.0

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures bulls have the firm overall near-term technical advantage but now may be near-term exhausted. Silver bulls' next upside price objective is closing prices above solid technical resistance at this week’s high of $30.35 an ounce. The next downside price objective for the bears is closing prices below solid support at $26.00. First resistance is seen at $28.00 and then at $28.50. Next support is seen at the overnight low of $27.28 and then at $27.00. 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.