Gold, silver holding modest gains as midday approaches

(Kitco News) - Gold and silver prices are are modestly up as midday approaches Wednesday. Some short covering from the shorter-term traders in the futures markets is featured. However, buying interest in the precious metals remains constrained at mid-week amid a stronger U.S. dollar and a breakdown in the crude oil market Tuesday. April gold futures were last up $5.70 at $1,730.80 and May Comex silver was last up $0.103 at $25.33 an ounce.

A marketplace feature at mid-week is that one of the world's largest container ships got turned sideways in high winds Tuesday and became grounded in Egypt's Suez Canal, blocking global shipping, possibly for days. Reports said about 10% of global trade runs through the Suez Canal, including crude oil. Crude oil's rebound today after strong losses that pushed prices to a six-week low on Tuesday is likely due in part to the blockage of the canal. Still, serious near-term technical damage was inflicted in crude oil Tuesday, to strongly suggest that market has topped out and that crude prices will now trade sideways at best for an extended period. More importantly, the breakdown in crude oil futures sends a strong message to the big, speculative "fund" futures traders that the bull moves in other commodities have also run their course for now, and it may now be time for those funds to initiate bigger short positions in commodity futures markets. Crude oil is arguably the leader of the raw commodity sector and when that market suffers, traders tend to at least shy away from other commodity futures markets, if not outright sell them.

Global stock markets were mixed to lower overnight. U.S. stock indexes are mixed to higher today. Rising Covid-19 infections in Europe and the resulting business lockdowns, and some worries about a third wave hitting the U.S., have prompted a bit keener risk aversion in the markets this week.

U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell today are speaking to a U.S. Senate panel regarding President Biden's $1.9 trillion stimulus package and his planned $3 trillion infrastructure program. Both spoke to a House committee Tuesday and laid out their cases for more government spending and continued monetary policy accommodation. Their comments did not have a significant impact on the markets Tuesday and the same is true so far today.

The other key "outside market" today sees the U.S. dollar index higher and hitting a four-month high overnight as the greenback bulls have restarted a price uptrend on the daily bar chart. The stronger dollar is also a negative for many commodity markets because many of them are priced in U.S. dollars on the world market. So when the dollar appreciates it makes those commodities more expensive to purchase in non-U.S. currency. Meantime, the U.S. Treasury 10-year note yield is fetching 1.623% Wednesday morning.

Technically, the April gold futures bears have the overall near-term technical advantage. Bulls' next upside price objective is to produce a close in April futures above solid resistance at $1,775.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the March low of $1,673.30. First resistance is seen at the overnight high of $1,734.70 and then at this week's high of $1,747.00. First support is seen at the overnight low of $1,722.30 and then at last week's low of $1,716.60. Wyckoff's Market Rating: 3.5

May silver futures bears have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $27.50 an ounce. The next downside price objective for the bears is closing prices below solid support at the March low of $24.845. First resistance is seen at $25.50 and then at $26.00. Next support is seen at $25.00 and then at $24.845. Wyckoff's Market Rating: 4.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com