Gold, silver weaker; bullish spark needed

Gold, silver weaker; bullish spark needed

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Gold and silver prices are modestly lower in midday U.S. trading Thursday, even as global equity markets have paused late this week following recent rallies. The safe-haven metals bulls need a new fundamental development to spook the marketplace and jumpstart their near-term price uptrends. August gold futures were last down $6.20 an ounce at $1,729.40. July Comex silver prices were last down $0.26 at $17.515 an ounce.

Global stock markets were mixed in overnight trading. U.S. stock indexes are slightly lower at midday. Risk appetite appears to be receding a bit late this week as Covid-19 cases in many U.S. states are on the rise, prompting concerns those states may have to once again impose restrictions on their businesses and the public. Reports said the second wave of the pandemic outbreak in Beijing, China has been quickly contained but other countries are seeing the virus spread.

Said one market analyst in a morning email dispatch, some of which has been edited for clarity: “Covid-19 and the Fed’s (and other central banks’) actions are influencing a herd mentality to financial markets where rational risk and reward calculations are no longer in place. The first sign of trouble sees investors flee to safe havens, and when the Fed plays the put (put option, meaning adding more stimulus), traders take the opposite side of the trade. This kind of environment will keep volatility heightened in the near term.

In my opinion, the problem that the Fed and other central banks have caused over the past couple of months is that retail investors are bidding up some of the worst-performing companies just because they believe the current policies will keep them afloat…. This is leading to the creation of a big bubble in asset prices and the further it grows, the more damage it will make when it bursts.”

Options may be cash settled or physically delivered. ETF options, like SPY, expire into a position in the ETF. Index options, like the comparable Mini-SPX, are cash settled. This key difference is particularly important when we talk about “gap risk.”

The important outside markets today see the U.S. dollar index higher. Meantime, Nymex crude oil prices are up and trading around $38.75 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.7% level.

Live 24 hours gold chart [Kitco Inc.]

Technically, August gold futures bulls still have the firm overall near-term technical advantage as trading is in a choppy and sideways pattern at higher levels. Longer term, such action could be storing energy for another leg up in prices in the coming weeks or months. Gold bulls’ next upside near-term price objective is to produce a close above solid technical resistance at $1,761.00.

Bears’ next near-term downside price objective is pushing prices below solid technical support at $1,700.00. First resistance is seen at $1,743.80 and then at $1,750.00. First support is seen at $1,717.30 and then at this week’s low of $1,706.20. Wyckoff’s Market Rating: 7.0

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures prices were nearer the session low at midday and scoring a bearish “outside day” down on the daily bar chart. The silver bulls have the overall near-term technical advantage but have faded a bit recently. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $19.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at today’s high of $17.92 and then at $18.00. Next support is seen at today’s low of $17.40 and then at $17.25. Wyckoff’s Market Rating: 6.5.

July N.Y. copper closed up 5 points at 259.00 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Copper bulls’ next upside price objective is pushing and closing prices above solid technical resistance at the June high of 270.00 cents.

The next downside price objective for the bears is closing prices below solid technical support at 240.00 cents. First resistance is seen at today’s high of 262.60 cents and then at 265.00 cents. First support is seen at this week’s low of 253.10 cents and then at 250.00 cents.

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