Gold prices are posting strong gains in early U.S. trading Wednesday, as the U.S. stock market has rebounded from selling pressure seen on Monday and Tuesday, while crude oil prices are also posting solid advances at mid-week. There also could be some safe-haven demand amid talk some Asian investors and financial markets have been badly hurt by the collapse in crude oil prices this week. A weaker U.S. dollar index is also working in favor of the precious metals markets bulls. June gold futures were last up $40.30 an ounce at $1,728.00. May Comex silver prices were last up $0.274 at $15.15 an ounce.
Global stock markets were mostly up in overnight trading. U.S. stock indexes are solidly higher in early New York trading. The U.S. stock indexes are seeing a corrective bounce at mid-week, following solid losses scored on Monday and Tuesday. The U.S. equity traders are watching corporate earnings reports that have started to come out this week, but have so far been mostly overshadowed by the collapse in the global crude oil market.
The marketplace is showing some delayed reaction to a tweet from President Trump Wednesday morning that said, “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” A while after the tweet, gold prices slightly extended gains, while crude oil prices rallied. It could be that both gold and crude were reacting more to the rally in the stock market than the tweet. That’s unclear. Still, the U.S.-Iran tensions were escalated by Trump’s tweet and those tensions will likely get worse before they get better and merit the close attention of traders and investors.
This week’s stunning and historic trading action in crude oil futures, in which the just- expired May Nymex contract fell deep into negative price territory but recovered to around $10 a barrel by its expiry, and which has seen Brent crude oil futures fall below $20 a barrel and hit a 21-year low, has possibly caused some oil-based exchange traded funds (ETFs) to be at or near a state of total failure. Speculation in the marketplace at present is that Asian investors have been hit the hardest—so hard that some Asian financial markets could experience a contagion effect and implode, themselves. So far this is just speculation.
What was so ironic for this veteran markets reporter on Monday and Tuesday was the eerie calm in the foreign exchange markets, amid the storm of an unprecedented meltdown in the global oil market—arguably the most fungible commodity market in the world. The Russian ruble has been dinged, but the FOREX “majors” appear to have paid little attention to the matter.
However, if Asian financial markets become keenly distressed the FOREX majors will wake up in a hurry. Of note, Hong Kong’s de-facto central bank, the Hong Kong Monetary Authority, on Wednesday implemented a temporary U.S. dollar-liquidity facility for the city-state’s banks. The move allows holders of U.S. Treasuries to borrow greenbacks against their Treasury holdings. The action could be tied to crude oil’s severe price declines this week and could be a precursor for some rough waters just ahead in the Asian financial markets.
Oil prices are solidly higher today, with Nymex West Texas Intermediate (WTI) June futures trading up around $2.50 at $11.50. The other important outside markets today see the U.S. dollar index weaker on a corrective pullback from recent gains. The 10-year U.S. Treasury note yield is trading around 0.58% this morning.
U.S. economic reports due for release Wednesday include the weekly MBA mortgage applications survey, the monthly house price index and the weekly DOE liquid energy stocks report.
Technically, the gold bulls have the firm overall near-term technical advantage amid price uptrends in place on the daily, weekly and monthly charts. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00. First resistance is seen at the overnight high of $1,729.20 and then at $1,740.00. First support is seen at the overnight low of $1,695.40 and then at $1,675.00. Wyckoff’s Market Rating: 7.0
May silver futures bulls and bears are on a level overall near-term technical playing field as 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 the April high of $16.30 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.00. First resistance is seen at Tuesday’s high of $15.56 and then at this week’s high of $15.69. Next support is seen at this week’s low of $14.56 and then at $14.25