Gold sees modest rebound on short covering, bargain hunting

(Kitco News) - Gold prices are moderately higher in midday trading Wednesday. Some short covering in the futures market and bargain hunting in the cash market are featured after prices overnight fell to a three-week low. Still, the safe-haven metals continue to be hamstrung by rallies in global stock markets this week and an appreciating U.S. dollar. February gold futures were last up $7.10 an ounce at 1,562.50. March Comex silver prices were last up $0.054 at $17.615 an ounce.

Gold prices wavered this morning following the release of the ADP national employment report for January that came in at up 291,000, which was much higher than the forecast rise of 150,000. This report is a precursor to Friday morning’s more important jobs report from the Labor Department. Non-farm payrolls in that report are forecast at up around 160,000 in January. However, today’s strong ADP number has many now thinking Friday’s non-farm jobs number will be solid, too.

Gold prices regained ground when the U.S. stock indexes backed off from their early, sharp gains that have prices at record or near-record highs again. Asian and European shares also moved higher Thursday as traders and investors have at least for now pushed aside earlier concerns about the coronavirus outbreak in China significantly denting world economic growth. The marketplace is reacting to the rate of spread of the illnesses slowing down, even though total numbers of those afflicted is rising. There are also reports that a drug is being developed to counteract the virus. As is many times the case, an unexpected shock to the marketplace is initially deemed by traders as being close to a worst-case scenario and market prices react accordingly. Then, such turns out not to be the case, as is apparently so with the coronavirus outbreak.

The marketplace this week sees it as especially encouraging that China’s central bank stepped in an provided significant liquidity to China’s financial system, specifically by reducing short-term lending rates with the influx of funding. The effort was in response to the coronavirus outbreak’s negative impact on China’s businesses.

U.S. stock market traders this week are buzzing about the stock price of Tesla, which had soared around 50% since the beginning of January before backing down today. Some pessimistic stock market watchers are calling Tesla’s move a euphoria that can signal the top in a stock market rally.

The key outside markets today see crude oil prices solidly higher and trading around $51.50 a barrel. Meantime, the U.S. dollar index is higher and hit a nearly four-month high today.

Technically, April gold futures prices closed nearer the session high today on short covering after hitting a three-week low overnight. The bulls have the slight overall near-term technical advantage. However, a three-month-old price uptrend on the daily bar chart has at least temporarily been negated. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,598.50. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,535.00. First resistance is seen at today’s high of $1,566.20 and then at $1,570.00. First support is seen at today’s low of $1,551.10 and then at 1,542.80. Wyckoff's Market Rating: 5.5

March silver futures closed near mid-range today. The silver bulls and bears are on a level overall near-term technical playing field amid choppy trading conditions. A fledgling downtrend line is in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $18.375 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 Tuesday’s high of $17.77 and then at $18.00. Next support is seen at the January low of $17.28 and then at $17.00. Wyckoff's Market Rating: 5.0.

March N.Y. copper closed up 375 points at 258.00 cents today. Prices closed near mid-range on more short covering after hitting a more-than-four-year low Monday. The copper bears still have the firm overall near-term technical advantage amid a price downtrend in place. More gains this week would negate the price uptrend and suggest a market bottom is in place. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 270.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 245.00 cents. First resistance is seen at today’s high of 260.55 cents and then at 263.00 cents. First support is seen at today’s low of 254.25 cents and then at 252.00 cents. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com