(Kitco News) - A rout in the U.S. stock market Wednesday prompted further safe-haven buying in the gold market as the precious metal’s price pushed back above the key $1,100.00 level. Risk aversion was high as talk of financial market dislocation and even contagion was heard. February Comex gold was last up $17.70 at $1,106.80 an ounce. March Comex silver was last up $0.054 at $14.175 an ounce.
The Dow Jones Industrial Average was down over 500 points at one point as the index is closing in on a two-year low. The Nasdaq and S&P index were also sharply lower and at multi-month lows. Asian and European stock markets were also solidly lower overnight.
The culprit continues to be slumping crude oil prices that are spooking world financial and commodity markets. Nymex crude futures dropped to another 12-year low below $27.00 a barrel overnight. Worries about less demand for world-wide goods from China, the world’s second-largest economy, are also weighing on stock markets around the globe. There is also concern that heavy capital outflows from China will further damage China’s economy.
The Russian ruble hit a multi-year low against the U.S. dollar today, as did the Hong Kong dollar, amid the crude oil price plunge and financial market uncertainty. The ruble’s and HK dollar’s troubles underscore the present serious strains in the periphery currency markets. This situation is adding to the buying interest in safe-haven gold.
U.S. economic data released Wednesday included the consumer price index, which had a reading of down 0.1% in December. This report only adds to the price deflation worries in the world marketplace. The European Union is struggling to reflate its consumer and producer prices, but with little success.
The early-2016 world stock market meltdown and financial market worries are producing growing notions the U.S. Federal Reserve will not be able to raise interest rates any time soon, following the first rate hike in nine years that occurred in mid-December. Some are even saying the next move by the Fed will be further quantitative easing of its monetary policy, to ward off another economic recession.
The European Central Bank’s regular monetary policy meeting is Thursday. Given the recent dour stock and financial markets’ performance, many are wondering if the ECB will announce further monetary policy stimulus measures on Thursday, or at least suggest more stimulus is coming down the road.
Technically, February gold futures prices closed nearer the session high today. The gold bears still have the overall near-term technical advantage. However, the recent choppy, sideways trading and today’s rally suggest this market has put in at least a near-term low. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,130.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at last week’s low of 1,071.10. First resistance is seen at today’s high of $1,109.90 and then at the January high of $1,113.10. First support is seen at $1,100.00 and then at today’s low of $1,087.10. Wyckoff’s Market Rating: 3.5
March silver futures prices closed nearer the session high today on tepid short covering in a bear market. The silver market bears still have the firm overall near-term technical advantage. However, the sideways trading action the past several weeks does begin to hint a market bottom is in place. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $14.425 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the contract low of $13.64. First resistance is seen at the January high of $14.385 and then at $14.425. Next support is seen at $14.00 and then at this week’s low of $13.84. Wyckoff's Market Rating: 2.5.
March N.Y. copper closed down 165 points at 196.05 cents today. Prices closed nearer the session low. Prices Tuesday hit a contract and six-year low. There was not follow-through buying Wednesday and a bullish “key reversal” up was not confirmed. The copper bears have the solid overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 210.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 190.00 cents. First resistance is seen at 200.00 cents and then at this week’s high of 201.30 cents. First support is seen at $1.9500 and then at the contract low of 193.55 cents. Wyckoff's Market Rating: 1.5.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff
