(Kitco News) - Gold and silver prices are solidly lower in midday U.S. trading Monday, but up from their session lows on some bargain hunting and safe-haven demand. Gold hit a two-week low overnight and silver a three-month low. Some recent downbeat U.S. economic data has prompted worries about a U.S. and/or global recession and has the world marketplace on a knife’s edge. December gold was last down $21.60 at $2,448.30. September silver was down $0.972 at $27.42.
A meltdown in global stock markets has the general marketplace spooked to start the trading week. Unwinding of Japanese yen carry trades (see my special report on Kitco today) has put much of the marketplace in liquidation mode, including the metals. This is a metals-bearish element at present and is mostly superseding safe-haven demand for gold and silver. However, if the sell off in global stock markets continues, that mentality could quickly change into keen safe-haven demand for the two precious metals amid the high anxiety in the marketplace.
Broker SP Angel today said in an email dispatch: “Chaos in Japan is weighing on global markets, with the liquidity crunch likely seeing traders sell assets, including gold, to cover margin calls.” Japan’s finance minister has urged Japanese investors to remain calm, which usually has the opposite effect. The Japanese Nikkei fell 12.4% overnight—the biggest one-day loss since Black Monday in 1987. Japan’s stock market losses were linked to the dramatic rally in the yen against the U.S. dollar.
There’s an old saying in the marketplace that during panicky times, if you can’t sell what you want, you sell what you can. That appears to be the case in gold and silver today, and part of the reason the safe-haven metals are not performing to the upside during the heightened uncertainty.
Recent weaker U.S. economic data, highlighted by last Friday’s downbeat monthly U.S. jobs report, have quickly ignited U.S. economic recession fears. U.S. Treasury yields have dropped, with the 10-year Treasury note yield presently at 3.809% and down around 1% since the April highs. Markets have quickly priced the chance of an emergency Federal Reserve rate cut over the next week at 60%. Wharton’s Jeremy Siegal said on CNBC today the Fed needs to make an emergency 0.75% rate cut this week and another 0.75% rate cut at its September FOMC meeting.
Reads a Barron’s headline today: “Recession odds climb to 25% after weak jobs number, Goldman Sachs says.” A Wall Street Journal article is headlined: “Fed faces renewed threat of hard economic landing.”
The VIX stock market volatility index has hit its highest level in four years.
Asian and European stock indexes were sharply lower overnight, following Wall Street’s steep sell off late last week. U.S. stock indexes are sharply lower at midday but well off daily lows.
Worries about a broader Middle East war are also weighing on trader and investor sentiment at present. Israel is bracing for a major attack from Iran after Israel last week assassinated key military officials from Hamas and Hezbollah.
The key outside markets today see the U.S. dollar index lower and hitting a 4.5-month low. Nymex crude oil prices are near steady after hitting a six-month low overnight and are trading around $72.25 a barrel.
Technically, December gold bulls still have the overall near-term technical advantage but are fading. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $2,537.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,350.00. First resistance is seen at 2,481.10 and then at $2,500.00. First support is seen at $2,425.00 and then at today’s low of $2,403.80. Wyckoff's Market Rating: 6.5.
September silver futures bears have the overall near-term technical advantage and gained fresh power today. Prices are in a 2.5-month-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week’s high of $29.355. The next downside price objective for the bears is closing prices below solid support at $25.00. First resistance is seen at $28.00 and then at $28.50. Next support is seen at $27.00 and then at today’s low of $26.595. Wyckoff's Market Rating: 3.5.
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