Gold, silver prices rally as storm clouds on horizon

Gold, silver prices rally as storm clouds on horizon

Date: 01/10/2019

Jim Wyckoff Tuesday October 01, 2019 13:03
Kitco News

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(Kitco News) – Gold and silver prices are solidly higher in midday trading Tuesday, with gold turning around modest early losses as trouble is brewing on a few fronts, prompting demand for the safe-haven metals. Earlier today gold prices had hit a seven-week low and silver a six-week bottom. December gold futures were last up $15.50 an ounce at 1,488.20. December Comex silver prices were last up $0.257 at $17.25 an ounce.

A weaker-than-expected U.S. manufacturing report this morning that saw the ISM manufacturing index fall to 47.8 in September from 49.1 in August helped to turn the gold market around. The ISM data falls into the camp of the monetary policy doves who want to see the U.S. Federal Reserve further ease interest rates. The ISM report also dropped the U.S. dollar index down from its new high for the year that was scored earlier today, and also dropped the U.S. stock indexes lower on the day. Both U.S. stock indexes and the USDX are trading nearer their session lows at midday.

It also supporting safe-haven gold and silver is a significant escalation in protesting in Hong Kong, on China’s national holiday for the Communist Party. Reports Tuesday said one protester was shot with live ammunition by police, and the demonstrations are becoming more violent. If mainland China steps in to intervene in the matter it would quickly become a front-burner issue for the marketplace, which at present is not being significantly impacted by the situation.

It also appears President Trump’s administration could be falling deeper into a quagmire regarding the House of Representatives’ impeachment inquiry. Several of Trump’s close associates, including cabinet members and hit lawyer, are likely to be forced to testify under oath in front of the House.

Traders are also monitoring world government bond markets, which today saw selling pressure following a surprisingly very weak pubic acceptance of the latest bond offering from the Japanese government. Recent illiquidity in overnight funding of financial markets has raised eyebrows of financial market watchers, too, and has prompted the Federal Reserve to inject liquidity into the overnight funding system for the first time in years.

In other overnight news, the Euro zone manufacturing purchasing managers index (PMI) fell to its lowest level in seven years, at 45.6 in September from 47.0 in August. The German manufacturing PMI was even worse in September, at 41.7. A reading below 50.0 suggests contraction in the sector. The Euro currency continues to slump against the U.S. dollar.

Australia’s central bank on Tuesday cut its interest rate by 0.25%, to 0.75%.

The World Trade Organization said Tuesday global economies are set for their weakest trade growth rate in 2019 since the major financial crisis over ten years ago. The WTO said global trade will slow to 1.2% this year from a 3% growth rate in 2018. The WTO blamed the trade war between the U.S. and China for the slowdown in trade.

Technically, the gold bulls have lost their overall near-term technical advantage, as a four-month-old uptrend on the daily bar chart has been negated and a four-week-old downtrend has begun—even with today’s gains. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at $1,515.00. Bears’ next near-term downside price breakout objective is pushing December futures prices below solid technical support at $1,450.00. First resistance is seen at today’s high of $1,493.50 and then at $1,500.00. First support is seen at $1,475.00 and then at the overnight low of $1,465.00. Wyckoff’s Market Rating: 5.0.

December silver futures bears have the overall near-term technical advantage. A four-week-old downtrend is in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at today’s high of $17.375 and then at $17.50. Next support is seen at the overnight low of $16.94 and then at $16.80. Wyckoff’s Market Rating: 4.0.

By Jim Wyckoff