(Kitco News) - Gold prices in early U.S. trading Thursday are seeing a downside technical correction and some mild profit-taking pressure following recent gains. However, there is still some risk aversion in the world marketplace that will limit selling pressure on the safe-haven precious metal. February Comex gold was last down $7.10 at $1,099.10 an ounce. March Comex silver was last down $0.07 at $14.09 an ounce.
Asian stock markets were lower overnight, following the sell-off in U.S. stock market Wednesday that drove the major indexes to multi-month lows. European stock markets were firmer as traders and investors were awaiting the European Central Bank’s regular monetary policy meeting Thursday. The ECB left its monetary policy unchanged Thursday, which was expected. However, given the recent dour stock and financial markets’ performance, many are wondering if the ECB will announce further monetary policy stimulus measures down the road. U.S. stock indexes are pointed to lower but not sharply lower openings when trading gets underway in the day session.
Slumping crude oil prices that are at 12-year lows continue to spook world financial and commodity markets. Nymex crude futures dropped below $27.00 a barrel on Wednesday. There are growing concerns that many companies in the oil industry, and the banks that have outstanding loans to those companies, are in big trouble and could default on obligations, to create a contagion effect.
Worries about slowing economic growth in China, the world’s second-largest economy, are also weighing on stock markets around the globe. There are also worries that heavy capital outflows from China will further damage China’s economy.
All of the above are further compounding anxieties about worldwide price deflation setting in. Deflation is the enemy of economies and most markets.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the weekly DOE liquid energy stocks report and the Philadelphia Fed business survey.
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Wyckoff’s Daily Risk Rating: 3.0 (Trader and investor market risk aversion is somewhat elevated today.)
(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 5, with 1 being least risk-averse (most risk-on) and 5 being the most risk-averse (risk-off).
Technically, gold bears still have the overall near-term technical advantage. However, recent price action that has been choppy and sideways does favor the bulls and begins to suggest a market bottom may be in place. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the January high of $1,113.10. Bears' next near-term downside price breakout objective is closing prices below solid technical support at last week’s low of $1,071.10. First resistance is seen at today’s high of $1,104.80 and then at $1,113.10. First support is seen at the overnight low of $1,096.40 and then at Wednesday’s low of $1,087.10. Wyckoff’s Market Rating: 3.0
Silver bears have the solid overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing December futures prices above solid technical resistance at the December high of $14.64 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the contract low of $13.62. First resistance is at this week’s high of $14.22 and then at the January high of $14.385. Next support is seen at $14.00 and then at last week’s low of $13.73. Wyckoff's Market Rating: 2.0.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff
