Gold and silver modestly up amid bullish charts, outside markets

New York (May 20)  Gold and silver prices are trading with modest gains in midday U.S. dealings Wednesday. Trading has been choppy and on both sides of unchanged today. The silver market is on fire this week and today pushed to a nearly three-month high above $18.00. As has been the case in recent weeks, gold and silver prices are holding their own at the same time the U.S. stock indexes are solidly higher. June gold futures were last up $4.60 an ounce at $1,750.30. July Comex silver prices were last up $0.134 at $18.035 an ounce.

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Trader and investor enthusiasm is just a bit muted at mid-week after the initial optimism regarding a successful phase-one Covid-19 vaccine test performed very well. The majority of medical experts still believe any proven vaccine is at least one-year away.

Despite continued dour economic data being released from the major world economies, and reports that the pandemic in Brazil is careening out of control, world stock markets are performing well. It’s likely a case of traders/investors having “pandemic-fatigue” and are in denial of what is occurring and will continue to occur in the coming months, or they were hit with the Covid-19 shock so hard that within a period of just a few weeks they factored into market prices a worst-case scenario, and now the markets are recovering because such a scenario is not playing out—at least not yet. Maybe some of both.

The German government on Wednesday auctioned its 10-year bond (bund) and it fetched an average yield of -0.47%. So, for the next 10 years investors that bought the bunds were willing to accept negative returns. Their logic must be that economic times will get even worse in the coming years and that price deflation will become problematic. The bund investors’ logic comes at a time when the world’s central banks have flooded their financial systems with record amounts of liquidity in an attempt to rescue their floundering economies. Veteran market participants have heard the saying that bond traders are the smartest traders in the world. However, this veteran market watcher will take the other side of the deflation trade that bund buyers are presently making. Economics 101 has historically taught that increased money supply and velocity create price inflation, not deflation.

The important outside markets see Nymex crude oil futures higher today and trading around $32.75 a barrel. The U.S. dollar index is weaker again Today. These two markets are in a bullish posture for the metals markets. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.69%.

Technically, the gold bulls have the solid overall near-term technical advantage as prices are not that far from last month’s multi-year high. Gold bulls' next upside near-term price objective is to produce a close above solid technical resistance at the April high of $1,788.80. Bears' next near-term downside price objective is pushing prices below solid technical support at $1,666.20. First resistance is seen at today’s high of $1,757.60 and then at this week’s high of $1,775.80. First support is seen at this week’s low of $1,727.20 and then at $1,716.00.

By 3:00pm EST spot gold was pretty near flat...up less than $2 at $1,71, while spot silver totally flat at $17.54.

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