(Kitco News) – Gold and silver pricesare trading sharply down in panic market conditions in early U.S. trading Monday. Gold prices hit a three-month low and silver futures prices dropped to an 11-year low. U.S. stock index futures are pointed toward untradable locked-limit-down openings, further exacerbating the “sell what you can” panic at present. April gold futures were last down $44.30 an ounce at $1,472.00. May Comex silver prices were last down $1.79 at $12.70 an ounce.
Global stock markets were also solidly lower in overnight trading. Trader and investor confidence appears to be going from bad do worse to start the trading week, as over the weekend U.S. non-essential commerce began to shut down amid the coronavirus pandemic. Major stores are closing, public schools are closing, Colorado shut down all of its ski slopes and some states have ordered the closing of bars and restaurants. U.S. airlines are in financial peril as passenger traffic plummets. This follows the moves last week to effectively shut down most major sporting events in the U.S. The U.S. Center for Disease control has warned most Americans to stay home and recommended gatherings of 50 or more people be cancelled for at least the next two months.
The U.S. Federal Reserve on Sunday afternoon again cut its key interest rate, by 1.0% this time, to a range of zero to 0.25%. The Fed also will pump an additional $700 billion into the U.S. financial system (quantitative easing) and has opened up swap lines with other major central banks, in an effort to keep liquidity in the financial markets. President Trump and Congress over the weekend agreed on an aid bill for businesses and consumers negatively impacted by the virus outbreak. Speculation is that it will take at least two months for this situation to get under control from a U.S. public health perspective.
Other world central banks over the weekend announced further actions to thwart the negative economic impact of the virus outbreak that has created a demand shock worldwide.
Following is an edited portion of one email dispatch from a market analyst Monday morning: “It’s becoming evident that the major central banks across the globe are using all their available tools to prevent a crisis, but it seems the fear of the pandemic is taking control of investors. Markets will continue going through this phase of extreme volatility until they are able to assess the scale of damage caused by the virus outbreak. The longer the outbreak persists and countries stay in emergency status, the harder the global economy will be hit. A recession seems almost impossible to prevent at this stage, but the question remains, how bad is it going to be? Equity strategists will not be able to provide meaningful targets for stock prices. That’s because even companies themselves cannot project revenue targets in such situations.”
Economic data released by China Monday showed industrial production in the world’s second-largest economy plunged 13.5% in the first two months of 2020. Retail sales dropped 20.5% in the period as consumers were locked at home. Traders are wondering if the same dour economic numbers will start to come out of Europe and the U.S.
The benchmark 10-year U.S. Treasury note sees its yield around 0.8% Monday. The U.S. dollar index is solidly lower in early U.S. trading. Nymex crude oil prices are solidly down and trading around $30.00 a barrel.
U.S. economic data due for release Monday includes the Empire State manufacturing survey.
Technically, the gold bears have the firm overall near-term technical advantage amid the steep price downdraft. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $1,550.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,400.00. First resistance is seen at $1,500.00 and then at $1,525.00. First support is seen at the overnight low of $1,456.10 and then at $1,450.00. Wyckoff’s Market Rating: 3.0
May silver futures bears have the solid overall near-term technical advantage amid an extreme price downdraft. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $14.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $11.00. First resistance is seen at $13.00 and then at $13.50. Next support is seen at today’s low of $11.77 and then at $11.50. Wyckoff’s Market Rating: 1.0.
Author: Jim Wyckoff