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Gold price up on safe-haven demand amid anxious marketplace

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(Kitco News) - Gold prices are moderately higher and near daily highs in early U.S. trading Wednesday, on safe-haven buying amid a very nervous marketplace as the calendar is set to turn to what can be a tumultuous month of October for stock and financial markets. Traders and investors are keeping a very close eye on the currency markets. Gold prices did drop to a nearly 2.5-year low overnight. October gold was last up $7.00 at $1,633.80 and December silver was down $0.10 at $18.23.

The U.S. dollar index is higher and hit another 20-year high today. A Barron’s headline today reads, “The greenback has gone ballistic.” The strong U.S. dollar is putting serious pressure on the currencies of many smaller countries, which is very worrisome to those who endured currency crises of past decades. The main concern is a general marketplace contagion developing if secondary currencies dislocations and illiquidity spill over into extreme anxiety and lack of confidence in the global financial transactions system. The Chinese yuan hit a record low against the U.S. dollar today. Major economies have taken steps over the years to prevent another global financial market crisis, but when everyone runs for the exit doors at once, even robust systems can be over-run. Any investment bank or big hedge fund that appears to be in trouble may provide the first clue of a much bigger problem developing. Such a scenario would likely prompt a bigger into the hard assets, safe-haven gold and silver.

Global stock markets were mostly lower overnight. U.S. stock indexes are pointed to modestly lower openings when the New York day session begins and at or near for-the-move lows. The marketplace was somewhat assuaged overnight when the Bank of England made a surprise announcement that it will begin purchases of U.K. government bonds in order to stabilize the rattled U.K. bond market. The International Monetary Fund said the U.K. government should re-examine its stated plan to stimulate its economy through massive borrowing and bond sales.

Bearish bets in gold at 4-year high, but short squeeze is unlikely as U.S. dollar dominates

The key outside markets today see Nymex crude oil prices firmer on a corrective rebound after hitting a seven-month low Monday and are trading around $79.00 a barrel.

Meantime, the yield on the 10-year U.S. Treasury note is rising and presently fetching 3.896% after rising above 4.0% overnight. The 2-year Treasury note yield is 4.4%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, pending home sales and the weekly DOE liquid energy stocks report.

Live 24 hours gold chart [Kitco Inc.]

Technically, the October gold futures bears have the solid overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,687.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at Tuesday’s high of $1,640.20 and then at this week’s high of $1,646.20. First support is seen at the overnight low of $1,613.00 and then at $1,600.00. Wyckoff's Market Rating: 1.0

Live 24 hours silver chart [ Kitco Inc. ]

September silver futures bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $19.50. The next downside price objective for the bears is closing prices below solid support at the September low of $17.40. First resistance is seen at $18.50 and then at $19.00. Next support is seen at the overnight low of $17.895 and then at $17.40. Wyckoff's Market Rating: 2.0.

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.