Gold Backs Off On Chart Consolidation

(Kitco News) – Gold prices are modestly down in early U.S. trading Wednesday, on some normal backing and filling on the charts following recent good gains that pushed prices to a five-week high on Tuesday. February gold futures were last down $3.70 an ounce at $1,242.90. March Comex silver was down $0.075 at $14.565 an ounce.

World stock markets were mostly lower overnight, following the big sell off in the U.S. stock indexes Tuesday. The initial trader and investor euphoria over a U.S.-China trade dispute cease-fire for 90 days has rapidly dissipated. U.S. stock indexes did post modest rebounds in overnight trading. U.S. stock and financial markets are closed today for a day of mourning former U.S. President George H.W. Bush. Other commodity futures markets will be open today.

A feature in the marketplace recently that also has the stock market bulls spooked is falling U.S. Treasury yields (rising prices). The five-year T-Note yield is presently below the lower maturities. A fully inverted yield curve has been historically bearish for the U.S. economy and stock market. Right now the 10-year Treasury note yield remains above the 2-year, so the yield curve is not fully inverted.

If the U.S. stock market continues to sell off—especially in volatile price action–gold and silver prices would likely see appreciation on safe-haven demand.

The key outside markets today find the U.S. dollar index modestly lower. Meantime, Nymex crude oil prices are near steady and trading around $53.00 a barrel. The OPEC oil cartel will meet in Vienna, Austria on Thursday. Reports earlier this week said Russian and Saudi Arabian officials plan to extend production cuts. However, reports today said Saudi Arabia may not have agreed to a cut yet.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey and the Federal Reserve’s beige book.

Technically, gold bulls and bears are on a level overall near-term technical playing field, but the bulls still have some momentum on their side. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the October high of $1,252.00. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at last week’s low of $1,216.80. First resistance is seen at this week’s high of $1,247.50 and then at $1,252.00. First support is seen at the overnight low of $1,238.70 and then at Tuesday’s low of $1,235.80. Wyckoff’s Market Rating: 5.0

March silver futures bears still have the firm overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October high of $15.055 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the November low of $13.985. First resistance is seen at this week’s high of $14.745 and then at $15.00. Next support is seen at Tuesday’s low of $14.46 and then at this week’s low of $14.28. Wyckoff’s Market Rating: 3.0.

By Jim Wyckoff
For Kitco News


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