(Kitco News) – Gold prices are slightly higher in early-morning U.S. trading Thursday. Some mild safe-haven demand is featured amid two geopolitical developments this week. However, gains in gold are being limited by the specter of slower global economic growth meaning less demand for precious metals. June gold futures were last up $0.90 an ounce at $1,282.20. July Comex silver was last down $0.097 at $14.765 an ounce.
World stock markets were mostly lower overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. The U.S.-China trade war is on the brink of escalation, with both sides apparently digging in their heels and threatening new sanctions on each other. Chinese trade officials are in Washington Thursday to continue discussions. New U.S. tariffs on Chinese imported goods are set to go into effect at midnight tonight, with most now thinking no substantive deal can be reached at this time. President Trump said at a rally Wednesday evening that China “broke the deal.”
World government bond yields are declining amid concerns an escalation in the trade war between the world’s two largest economies will lead to slower global economic growth. That would be bearish for commodity markets, including the metals, due to less producer and consumer demand.
The Chinese yuan Thursday fell to its lowest level against the U.S. dollar since January.
The U.S.-China trade conflict is presently overshadowing another potential geopolitical flashpoint. Iran’s government said this week it will stop complying with some commitments it made in the United Nations nuclear deal in 2015. This week the U.S. sent a naval task force to the Persian Gulf, including an aircraft carrier, due to what the U.S. said were threats against the U.S. in the region. One miscalculation by either side could lead to serious military conflict.
In another interesting and seemingly contradictory development, the United Nations’ Food and Agriculture Organization (FAO) said global food prices rose 1.5% in April from March and hit a 10-month high. This report comes amid several major world economies releasing their producer and consumer price indexes that are generally reading under 2% inflation for the entire year. The FAO food inflation reading for April was 2.3% below the April 2018 reading, however. Many consumers would argue the FAO numbers are the correct ones.
Also reported today, China’s April consumer price index rose 2.5%, driven by a 14.4% surge in pork prices. Factory-gate prices rose 0.9% last month.
The key “outside markets” today see the U.S. dollar index near steady. Meantime, Nymex crude oil prices are weaker and trading just below $62.00 a barrel.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the producer price index, the international trade report, monthly wholesale trade, and the monthly chair store sales index.
Technically, the gold bears have the overall near-term technical advantage. A 2.5-month-old downtrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $1,300.00. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at $1,250.00. First resistance is seen at the overnight high of $1,286.40 and then at this week’s high of $1,292.80. First support is seen at this week’s low of $1,278.10 and then at $1,275.00. Wyckoff’s Market Rating: 3.5.
July silver futures bears have the overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $15.25 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.50. First resistance is seen at $15.00 and then at $15.15. Next support is seen at last week’s low of $14.57 and then at $14.50. Wyckoff’s Market Rating: 3.0.
By Jim Wyckoff
For Kitco News