(Kitco News) - Gold and silver prices are sharply lower in midday U.S. trading Monday, amid a major U.S. stock market sell off that has traders and investors spooked. Many traders in the general marketplace are exhibiting a mentality of, “if you can’t sell what you want, you sell what you can.” This keener uncertainty in the marketplace to start the trading week is not yet finding safe-haven demand for gold and silver. However, don’t be surprised to see some safe-haven buying surface in the two precious metals if the stock market sell off extends into Tuesday. The U.S. Treasury market is already seeing some safe-haven demand today. Some profit taking from the shorter-term futures traders is also seen in the gold market, after recent good gains. February gold was last down $40.70 at $2,738.70. March silver was down $0.815 at $30.37.
Over the weekend, traders and investors learned that China is seriously challenging U.S. leadership in the development of artificial intelligence. A small and relatively new Chinese company called DeepSeek has apparently produced a large language model that rivals many of the leading U.S. models--at a fraction of the cost of U.S. models. DeepSeek’s AI assistant is now the top-rated free application on Apple's app store. The news led to a sharp sell off across global technology stocks.
Traders and investors are reconsidering capital expenditures and valuations for U.S. AI models, given the threat of cheaper Chinese AI models—ones that appear to be as good, or better, than U.S. AI versions.
Bloomberg today said: “The sudden emergence of DeepSeek calls into question the underpinnings of the rally that’s added $15 trillion to the value of Nasdaq 100 Index companies since the end of 2022.”
Reads a Barrons headline today: “DeepSeek threatens to burst AI bubble.”
Big tech companies start reporting fourth-quarter earnings this week. Profits were already expected to come in at the lowest levels in almost two years. And that was before the weekend DeepSeek news.
In other overnight news, China’s economy entered 2025 on a weak note, prompting its central bank to inject record cash into China’s financial system this month. China’s non-Manufacturing purchasing managers index (PMI) came in below market expectations and below last month’s reading. The Manufacturing PMI also fell back into contraction territory. That’s also a bearish fundamental for the gold and silver markets, from a demand perspective. China is a major importer of raw commodities, including precious metals.
The U.S. data point of the week sees the Federal Reserve widely expected to hold U.S. interest rates steady at the FOMC meeting that begins Tuesday morning and ends Wednesday afternoon with a statement and press conference from Fed Chair Jerome Powell.
The key outside markets today see the U.S. dollar index near steady after hitting a five-week low early on. Nymex crude oil futures prices are sharply down and trading around $72.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at around 4.5%.
Technically, February gold futures bulls still have the firm overall near-term technical advantage. Prices are still trending up on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $2,826.30. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,650.00. First resistance is seen at $2,750.00 and then at the overnight high of $2,778.10. First support is seen at today’s low of $2,732.00 and then at $2,715.00. Wyckoff's Market Rating: 7.0.
March silver futures bulls have lost their slight overall near-term technical advantage. A price uptrend on the daily bar chart has been negated. Silver bulls' next upside price objective is closing prices above solid technical resistance at $32.00. The next downside price objective for the bears is closing prices below solid support at the December low of $29.145. First resistance is seen at $31.00 and then at $31.50. Next support is seen at $30.00and then at $29.50. Wyckoff's Market Rating: 5.0.
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