(Kitco News) – Gold prices are modestly weaker in early U.S. trading Friday, on a normal downside correction following good gains this week that pushed prices to a five-month high on Thursday. A rebound in the U.S. dollar index today is also working against the precious metals market bulls. However, if the U.S. stock market starts to bleed again, gold prices will likely see buying interest on more safe-haven demand heading into the weekend and into the Christmas holiday. February gold futures were last down $2.90 an ounce at $1,265.00. March Comex silver was down $0.069 at $14.80 an ounce.
The just-released third estimate of U.S. GDP report for the third quarter came in just a bit light at up 3.4%. A reading of up 3.5% was expected, year-on-year. The markets showed very little reaction to the report.
European and Asian stock markets were mostly lower overnight, following the solid losses in the U.S. stock market Thursday that drove the indexes to new lows for the year. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. Recently, on big sell off days in the U.S. stock market, trading starts out calmer and then gets more volatile and skittish as the sessions progress. Today could offer the same.
It’s still a very keen risk-off mentality in the world marketplace heading into the weekend and into the Christmas holiday next week. Worries about slowing world economies, slumping crude oil prices, a potential U.S. government shutdown later today, and a U.S. Federal Reserve that many say is out of touch with the markets are all combining to make traders and investors very squeamish. “When in doubt, get out,” is the mantra of many stock market traders at present. On the other hand, U.S. Treasury and gold market bulls are licking their chops amid the stock market meltdown.
In focus today is the U.S. Congress and President Trump in a stare-down on the federal budget. Trump wants funding for a border wall with Mexico, while the Democrat-controlled U.S. House does not. The U.S. government will see a partial shutdown at midnight tonight if there is no budget agreement reached by that time. This is not the major issue for the markets, but it is “piling on” in an already-shaky situation.
The key outside markets today see the U.S. dollar index higher on a corrective bounce from solid losses Thursday that pushed prices to a four-week low. The greenback has been hit by the more dovish Federal Reserve and easing tensions in the European Union regarding Italy’s finances, which have supported the Euro currency.
Meantime, Nymex crude oil prices are lower and hit a 17-month low of $45.32 a barrel overnight. There are still no early chart clues the crude oil market is near a bottom, but there is some strong longer-term chart support at the $42 area that may halt the slide.
Other U.S. economic data due for release Friday includes the durable goods report, the University of Michigan consumer sentiment survey, personal income and outlays and the Kansas City Fed manufacturing survey.
Technically, gold bulls have the firm overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the July high of $1,284.10. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at $1,236.50. First resistance is seen at this week’s high of $1,270.30 and then at $1,275.00. First support is seen at the overnight low of $1,259.30 and then at $1,250.00. Wyckoff’s Market Rating: 6.5
March silver futures bears still have the overall near-term technical advantage. However, a choppy five-week-old uptrend is in place on the daily bar chart. 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 $14.915 and then at $15.00. Next support is seen at this week’s low of $14.615 and then at $14.50. Wyckoff’s Market Rating: 3.5.
By Jim Wyckoff
For Kitco News