Gold, silver up on rebound from solid losses late last week

(Kitco News) - Gold and silver prices are sharply higher in midday U.S. futures trading Monday, on a corrective bounce following sharp losses posted late last week. The precious metals are seeing some perceived bargain hunting and some safe-haven demand. There is still some risk aversion in the marketplace as the coronavirus scare continues to play out. April gold futures were last up $37.30 an ounce at $1,604.00. March Comex silver prices were last up $0.313 at $16.77 an ounce.

Global stock markets were mostly higher overnight Monday, including a big rebound in the U.S. stock indexes as of midday, following last week’s shellacking. While the coronavirus outbreak continues to grip the global marketplace and is still causing trader and investor anxiety, the marketplace Monday morning is focusing on the likely stimulatory effects of central banks’ easing of their monetary policies in the days and weeks ahead. Fed Chairman Jerome Powell said Friday afternoon the Federal Reserve stands ready to act if conditions warrant. Other major central banks have just recently made similar comments. That’s a bullish scenario for the raw commodity sector, including the precious metals.

The Organization for Economic Cooperation and Development (OECD) has issued a report saying the coronavirus outbreak will take a heavy toll on the global economy this year. The think tank said the scale of the economic slowdown cannot be estimated at this point, but said a best-case scenario would be global growth being dinged by 0.5% annually, which would put it at 2.4%, according to the OECD. The OECD said the best-case scenario for China’s economic growth in 2020 would be down 0.8% from the OECD’s earlier projection of 5.7% growth.

Over the weekend China’s manufacturing purchasing managers index (PMI) came in at a record low of 35.7 in February versus 50.0 in January. Expectations were for a reading of around 45.0. A reading below 50.0 suggests contraction in the sector. The global manufacturers’ supply chains have been seriously disrupted as many factories in China, the world’s second-largest economy, are still closed.

The yield on the benchmark U.S. Treasury 10-year note has dropped to a record low of 1.031% overnight before rebounding a bit as global stocks recovered. Gold and silver prices are sharply higher early Monday.

The key outside markets today see Nymex crude oil prices solidly higher after hitting a 14-month low overnight, and trading around $47.00 a barrel in midday trading. The U.S. dollar index is trading sharply down today and hit a four-week low.

Technically, April gold bulls got back about half of Friday’s big losses. The bulls have the overall near-term technical advantage and are working to keep alive a 3.5-month-old price uptrend in place on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at the February high of $1,691.70. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at last week’s low of $1,564.00. First resistance is seen at today’s high of $1,612.10 and then at the January high of $1,619.60. First support is seen at $1,580.00 and then at today’s low of $1,576.30. Wyckoff's Market Rating: 6.0

May silver futures bears still have the overall near-term technical advantage after Friday’s huge drop to a seven-month low. 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 $17.06 and then at $17.25. Next support is seen at last week’s low of $16.40 and then at $16.25. Wyckoff's Market Rating: 3.5.

May N.Y. copper closed up 505 points at 259.10 cents today. Prices closed nearer the session high today and scored a bullish “outside day” up after hitting a four-week low early on. More gains this week would likely form a bullish double-bottom reversal pattern on the daily bar chart. The copper bears still have the overall near-term technical advantage. 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 the February low of 249.45 cents. First resistance is seen at today’s high of 260.20 cents and then at the February high of 263.95 cents. First support is seen at 255.00 cents and then at 252.50 cents. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com