Banking crisis contagion fears fuel gold rally

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(Kitco News) - Gold prices are sharply up and silver near steady near midday in the U.S. Wednesday. Both metals scored five-week highs today on safe-haven demand. Fears of a global banking/financial crisis are growing at mid-week. April gold was last up $18.80 at $1,929.80 and May silver was up $0.05 at $22.09.

The European banking sector is in keen focus as European banking stocks took a major hit today, led by Credit Suisse and worries about its financial health. The banking turmoil that started in the U.S. late last week has spread to Europe. Falling U.S. Treasury yields and a much stronger U.S. dollar index today are indicative of traders and investors who are highly stressed and wanting to hold those safe-haven assets. The benchmark 10-year U.S. Treasury note yield is presently fetching 3.432%.

The European Central Bank meets Thursday and was expected to raise its main interest rate by 50 basis points. However, the shaky banking sector in the Euro zone at present may at the last minute alter the ECB's plans. The Federal Reserve's FOMC meets next week and there is a hot debate in the marketplace regarding whether the Fed will raise its main interest rate by 25 basis points, or stand pat amid the U.S. banking crisis.

The data point of a very busy U.S. economic report day Wednesday saw the producer price index report for February come in cooler than expected. PPI came in down 0.1% from January after being forecast at up 0.3%. This follows a 0.7% rise in January from the December report. Tuesday's U.S. consumer price index report came out right in line with market expectations. Meantime, U.S. retail sales cooled of and were reported down 0.4% in February.

The key outside markets today see the U.S. dollar index sharply higher. Nymex crude oil futures prices are sharply down and hit a 15-month low, currently trading around $67.50 a barrel. 

Technically, April gold futures prices scored a bullish "outside day” up today and hit a five-week high. Bulls have the solid overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at the February high of $1,975.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at today's high of $1,935.60 and then at $1,950.00. First support is seen at $1,900.00 and then at today's low of $1,889.50. Wyckoff's Market Rating: 7.5

May silver futures prices hit a five-week high today. The silver bulls have the overall near-term technical advantage. Prices are in a fledgling uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. 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 $22.525 and then at $22.80. Next support is seen at today's low of $21.605 and then at $21.395. Wyckoff's Market Rating: 6.0.

May N.Y. copper closed down 1,240 points at 387.90 cents today. Prices closed nearer the session low and hit a nine-week low today. The copper bears have gained the overall near-term technical as prices are in a seven-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the March high of 417.25 cents. The next downside price objective for the bears is closing prices below solid technical support at 372.00 cents. First resistance is seen at 395.00 cents and then at 400.00 cents. First support is seen at today's low of 385.50 cents and then at 380.00 cents. Wyckoff's Market Rating: 4.0.

By

Jim Wyckoff

For Kitco News

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