Gold, silver see solid gains as coronavirus scare intensifies

(Kitco News) - Gold and silver prices are solidly higher in midday U.S. futures trading Thursday, on safe-haven demand. Marketplace focus Thursday is squarely back on the coronavirus outbreak that is spreading and which threatens to inhibit global economic growth. February gold futures were last up $13.80 an ounce at 1,583.90. March Comex silver prices were last up $0.488 at $17.98 an ounce and have gotten back most of this week’s solid losses.

After Tuesday and Wednesday shrugging off the coronavirus outbreak that is still not at all contained and apparently escalating, the global marketplace on Thursday was again on edge and risk averse regarding the matter. The latest reports say nearly 8,000 Chinese are afflicted and over 170 have died in China. There are six cases confirmed in the U.S. and the Trump administration has set up a task force to help deal with the situation. Global businesses located in China are closing their doors there and worldwide flights to China are being cancelled. The coronavirus outbreak is now being deemed more expansive than the SARS outbreak that occurred in Asia over 15 years ago.

U.S. traders are wondering if the seriousness of the coronavirus situation in China will give China a legal “out” on its recent signed trade-deal pledge to buy significantly more U.S. agricultural products in the next couple years.

At his press conference after the FOMC meeting conclusion Wednesday afternoon, Fed Chairman Jerome Powell said the coronavirus outbreak could have consequences for global economic growth and said the Fed is monitoring the situation closely. That comment along with other less upbeat remarks on the U.S. economy from Powell, including saying U.S. business investment and U.S. exports are weak, boosted the gold and Treasury markets and pushed U.S. stock indexes off their daily highs. Crude oil prices also sunk at the same time. There is now talk in the marketplace that the Fed will be forced to lower U.S. interest rates later this year.

The U.S. economic data point of the day Thursday saw the advance estimate of fourth-quarter GDP come in at up 2.1% on an annual basis, which is in line with market expectations. Markets showed little reaction to the report.

Asian and European stock markets were mostly lower overnight. Mainland China markets remain closed for the Lunar New Year holiday.  

The key outside markets today see crude oil prices lower, hitting a 3.5-month low and trading around $51.80 a barrel. Meantime, the U.S. dollar index is lower on a corrective pullback after hitting a two-month high earlier this week.

Technically, the gold bulls have the firm overall near-term technical advantage and gained fresh power today. A 2.5-month-old price uptrend is in place on the daily chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the January high of $1,613.30. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,550.00. First resistance is seen at this week’s high of $1,588.40 and then at $1,600.00. First support is seen at today’s low of $1,574.90 and then at $1,570.00. Wyckoff's Market Rating: 7.0

March silver futures bulls and bears are back on a level overall near-term technical playing field. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at the January high of $18.895 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.00. First resistance is seen at this week’s high of $18.375 and then at $18.50. Next support is seen at today’s low of $17.52 and then at this week’s low of $17.28. Wyckoff's Market Rating: 5.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com