Gold gains as global stock markets shudder on contagion fears
(Kitco News) - Gold prices are moderately up in midday U.S. trading Monday, on some safe-haven demand amid a rough start to the trading week for world stock markets. Still, gold bulls have to be disappointed their safe-haven metal did not perform better today, given the scope of losses in the U.S. stock indexes. Meantime, December silver futures hit a 14-month low today. If the selling pressure in the global stock markets persists this week, the two metals are likely to see better safe-haven demand. October gold futures were last up $9.20 at $1,758.60. December Comex silver was last down $0.167 at $22.17 an ounce.
Global stock markets were sharply down in overnight trading. The U.S. stock indexes are showing heavy losses and near session lows at midday. It's a big risk-off trading day in the historically sometimes-turbulent month of September for the stock and financial markets. The big Chinese property developer, Evergrande, is in big financial trouble and traders and investors are very worried about a contagion effect. Broker SP Angel in a morning dispatch said the editor of an official China newspaper has already commented Evergrande is "not too big to fail, suggesting policymakers may let it go under. China is now facing its own Lehman Brothers moment, with the potential to hit and collapse other lenders, suppliers and all manner of connected construction companies working on Evergrande's 1.4 million unfinished properties." Financial, real estate and insurance stocks were hit hard in Asia and Europe overnight. Reports said Black Rock, UBS and HSBC are big holders of Evergrande bonds. China's public holiday Monday added to the volatility in the Hong Kong stock market.
The Evergrande crisis comes as the U.S. Federal Reserve has its two-day monetary policy meeting beginning Tuesday morning and ending Wednesday afternoon with a statement and press conference from Fed Chairman Jerome Powell. The marketplace is wondering if a big sell off in global stock and financial markets early this week would impact the Fed's discussion on the timing of tapering its bond-buying program.
The key outside markets today see the U.S. dollar index slightly higher and hitting a four-week high overnight. Nymex crude oil futures prices are lower and trading around $70.50 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching 1.307%.
The crypto currencies are also getting smacked Monday, amid the risk aversion and on recent speculation major countries like the U.S. and China will move to more tightly regulate them. Meantime, gold prices are getting a safe-haven bid and trading modestly higher on the day. Interestingly, those who have hyped the cryptos as a safe-haven store of value and even a replacement for gold's safe-haven status appear to be eating their words on this day, when risk aversion is very keen. Many gold bugs have long advocated that when times get really shaky, gold's and the cryptos' true colors will show.
Technically, gold bears still have the overall near-term technical advantage. A two-week-old price downtrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at today's high of $1,766.00 and then at $1,775.00. First support is seen at today's low of $1,740.50 and then at $1,725.00. Wyckoff's Market Rating: 4.0
The silver bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.50 an ounce. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at today's high of $23.50 and then at $23.75. Next support is seen at today's low of $22.025 and then at $21.75. Wyckoff's Market Rating: 1.0.
December N.Y. copper closed down 1,365 points at 410.95 cents today. Prices closed near the session low and hit a four-week low today. The copper bears have gained the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 447.15 cents. The next downside price objective for the bears is closing prices below solid technical support at the August low of 396.65 cents. First resistance is seen at 420.00 cents and then at today's high of 424.60 cents. First support is seen at today's low of 410.00 cents and then at 405.00 cents. Wyckoff's Market Rating: 4.0.