(Kitco News) - Gold prices are sharply higher and silver is also posting good gains in morning U.S. trading Friday, despite a much-stronger-than-expected key U.S. economic report that fell squarely into the camp of the U.S. monetary policy hawks. Safe-haven demand is featured as it appears the bond market vigilantes are becoming more prominent and spooking the marketplace. February gold hit a four-week high overnight and was last up $39.20 at $2,730.00. March silver also notched a four-week high overnight and was last up $0.60 at $31.615.
Gold and silver market bulls are especially impressed that their markets are rallying despite daily gains in the U.S. dollar index and rising U.S. Treasury yields. Bond market vigilantes are defined as sovereign bond traders who sell bonds (push yields up) in order to signal to governments that their rising debt levels are not sustainable and won’t be tolerated by bond traders. There is presently significant turbulence in U.K. financial markets amid rising bond yields in the U.K., amid its debt troubles.
The U.S. data point of the week saw the employment situation report for December and its key non-payrolls increasing by 256,000, which is way above the 160,000 rise expected by the marketplace. The unemployment rate edged down to 4.1% from the 4.2% that was expected. The Wall Street Journal said “the results were the latest sign that the U.S. labor market has recovered from its mid-year stumble and may even be gaining steam.” The marketplace was already reckoning the Federal Reserve will be hard-pressed to continue to lower U.S. interest rates this year.
U.S. stock indexes are lower and sold off after the jobs report. The yield on the 10-year Treasury note spiked to near 5.0% right after the jobs report, but has backed down to around 4.8%. “This is creating a bit of a headwind for U.S. equities and this will increase should yields rise further,” said David Morrison of Trade Nation. “The next big hurdle, or target, for the 10-year is 5.0%. If it were to break above that and hold, then it’s likely that there would be a significant shift out of U.S. equities, particularly anything viewed as excessively overvalued (all the big techy, growth stocks) and a move back into the relative safety of fixed income, given the near-guaranteed 5% annual return on it,” said Morrison.
In overnight news, China’s central bank suspended purchases of Chinese government bonds in the open market, citing excess demand from the public. The move is also an attempt to support the beleaguered Chinese yuan in the foreign exchange market amid a listing Chinese economy.
The key outside markets today see the U.S. dollar index up in the wake of the strong jobs report. Nymex crude oil futures prices are sharply up, at a 5.5-month high, and trading around $77.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.8%.
Technically, February gold futures bulls have the firm overall near-term technical advantage and have momentum. Bulls’ next upside price objective is to produce a close above solid resistance at the December high of $2,761.30. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the December low of $2,596.70. First resistance is seen at today’s high of $2,735.00 and then at $2,750.00. First support is seen at $2,700.00 and then at the overnight low of $2,686.90. Wyckoff's Market Rating: 7.0.
March silver futures bulls have gained the overall near-term technical advantage and also have momentum. Silver bulls' next upside price objective is closing prices above solid technical resistance at $32.50. The next downside price objective for the bears is closing prices below solid support at $30.00. First resistance is seen at today’s high of $31.84 and then at $32.00. Next support is seen at $31.00 and then at today’s low of $30.70. Wyckoff's Market Rating: 6.0.
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