(Kitco News) – Gold prices are moderately lower in early U.S. futures trading Tuesday, on a corrective pullback from recent gains and as the U.S. stock market is staging a moderate recovery from Monday’s sharp losses. February gold futures were last down $5.00 an ounce at 1,572.10. March Comex silver prices were last down $0.221 at $17.835 an ounce.
Asian and European stock markets were mixed to weaker overnight. China markets are closed for the Lunar New Year holiday. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid losses Monday. There is still some risk aversion in the global marketplace as the coronavirus outbreak continues to spread in China, with over 100 dead and several thousand infected in that country, according to the latest reports. Other countries are also seeing its citizens contract the virus.
Veteran traders know that shock market events like the coronavirus outbreak tend to see the markets factor in worst-case scenarios in the early stages of the affair. Price action in several markets the past few days suggests this event will be factored into most market prices sooner rather than later—and may be already factored in altogether. Reason: Most shock events to markets do not have the worst-case scenario play out. Once traders realize the shock event is not as bad (for markets) as they first thought, the markets’ prices begin to move back toward where they were before the shock occurred. Of course, right now it’s still too early to tell if the markets have fully factored in the coronavirus and its impact on the global economy. By the end of this week, traders and investors should have a better idea whether the outbreak has mostly run its course, from a markets-impact perspective.
The coronavirus outbreak has overshadowed the meeting of the Federal Reserve’s Open Market Committee (FOMC) that begins Tuesday morning and ends Wednesday afternoon with a statement. No change in U.S. monetary policy is expected at this week’s meeting.
The key outside markets today see crude oil prices lower and trading around $52.75 a barrel. Meantime, the U.S. dollar index is slightly higher and hit a two-month high overnight.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, durable goods orders, the S&P/Core-Logic home price indexes, the Richmond Fed business survey, and the consumer confidence index.
Technically, the gold bulls have the firm overall near-term technical advantage, but the January spike high is still strong chart resistance to overcome. A price uptrend is in place on the daily chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the January high of $1,613.30. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,550.00. First resistance is seen at the overnight high of $1,582.20 and then at Monday’s high of $1,588.40. First support is seen at the overnight low of $1,570.50 and then at $1,565.00. Wyckoff’s Market Rating: 7.0
March silver futures bulls have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the January high of $18.895 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the January low of $17.59. First resistance is seen at the overnight high of $18.115 and then at Monday’s high of $18.375. Next support is seen at $17.75 and then at the January low of $17.59. Wyckoff’s Market Rating: 5.5.
By Jim Wyckoff
For Kitco News
Contact jwyckoff@kitco.com
www.kitco.com
