Gold, silver prices surge amid Fed gambit to cut U.S. rates

(Kitco News) - Gold and silver prices are sharply higher in midday U.S. futures trading Tuesday, with gold now gaining back all of Friday’s big losses. Save-haven demand is featured today as the U.S. Federal Reserve made the risky and surprising move of cutting the key U.S. interest rate by 0.5%. The U.S. stock market did not take the news well and the stock indexes were solidly at midday. April gold futures were last up $51.20 an ounce at $1,645.90. March Comex silver prices were last up $0.476 at $17.215 an ounce.

The Federal Reserve lowered its benchmark interest rate—the Fed funds rate—by 0.5% to counter the negative economic aspects of the coronavirus outbreak. The rate now stands at 1.0 to 1.25%. The aggressive move by the Fed initially popped the U.S. stock indexes sharply higher, but they come off those highs and hit new daily lows. The move by the U.S. central bank is very risky, as it might incite more fear in a marketplace that is already on edge. At first blush, the move by the Fed is not being deemed as reassuring for traders and investors, and that is what popped gold prices sharply higher. Federal Reserve Chairman Jerome Powell held a press conference after the announcement to explain the Fed’s move. He said there is “evolving risk” to the U.S. and global economies. Look for other major central banks to follow with their own monetary policy easing. The central banks of Australia earlier today cut its key interest rate by 50 basis points, too.

While the Covid-19, or coronavirus, outbreak appears to have slowed its rate of spread in China, the illness rate is growing outside of China, including South Korea, Italy and other countries. More cases are being discovered in the U.S. The marketplace is more focused on what the major economies of the world are doing to prevent economic damage. Many analysts are now saying the outbreak’s impact on global economies will be serious but the duration of the impact will be short. Powell was cautious at his press conference on putting a timetable on the progression of the outbreak and how long it might impact global economies.

Many are wondering if Monday’s big gains in the U.S. stock indexes point to market bottoms being in place. Maybe. A more solid clue that near-term market bottoms are in place in the stock indexes (or any other market that has been beaten down the past few weeks) would be two very strong up-days in a row, or a bullish weekly high close on a Friday.

The yield on the benchmark U.S. Treasury 10-year note hit a record low today of 1.023%, signaling safe-haven demand and also hinting at a global economic recession.

The key outside markets today see Nymex crude oil prices higher and trading around $47.30 a barrel in early trading. The U.S. dollar index is trading weaker today and hit a six-week low.

Technically, April gold were nearer the session high at midday today and have gotten back all of last Friday’s huge losses. The bulls have the solid overall near-term technical advantage and have kept 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 $1,662.50 and then at the $1,675.00. First support is seen at $1,625.00 and then at $1,600.00. Wyckoff's Market Rating: 7.5

May silver futures were nearer the session high at midday. The silver bears still have the slight overall near-term technical advantage. 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 $17.48 and then at $17.75. Next support is seen at $17.00 and then at today’s low of $16.665. Wyckoff's Market Rating: 4.5.

May N.Y. copper closed down 230 points at 257.20 cents today. Prices closed nearer the session low today. The copper bears have the firm 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 260.00 cents and then at today’s high of 262.5 0cents. First support is seen at today’s low of 254.65 cents and then at 252.50 cents. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com