Gold prices solidly up on rumors Asian markets in trouble
New York (Apr 22) Gold are posting good gains in early U.S. trading Wednesday, on safe-haven demand amid talk some Asian investors and financial markets have been badly hurt by the collapse in crude oil prices this week. A weaker U.S. dollar index at mid-week is also working in favor of the precious metals markets bulls. June gold futures were last up $32.50 an ounce at $1,720.10. May Comex silver prices were last up $0.204 at $15.085 an ounce.
This week’s stunning and historic trading action in crude oil futures, in which the just- expired May Nymex contract fell deep into negative price territory but recovered to around $10 a barrel by its expiry, and which has seen Brent crude oil futures fall below $20 a barrel and hit a 21-year low, has possibly caused some oil-based exchange traded funds (ETFs) to be at or near a state of total failure. Speculation in the marketplace at present is that Asian investors have been hit the hardest—so hard that some Asian financial markets could experience a contagion effect and implode, themselves. So far this is just speculation. What was so ironic for this veteran markets reporter on Monday and Tuesday was the eerie calm in the foreign exchange markets, amid the storm of an unprecedented meltdown in the global oil market—arguably the most fungible commodity market in the world. The Russian ruble has been dinged, but the FOREX “majors” appear to have paid little attention to the matter. However, if Asian financial markets become keenly distressed the FOREX majors will wake up in a hurry. Of note, Hong Kong’s de-facto central bank, the Hong Kong Monetary Authority, on Wednesday implemented a temporary U.S. dollar-liquidity facility for the city-state’s banks. The move allows holders of U.S. Treasuries to borrow greenbacks against their Treasury holdings. The action could be tied to crude oil’s severe price declines this week and could be a precursor for some rough waters just ahead in the Asian financial markets.
Oil prices are more stable today, with Nymex West Texas Intermediate (WTI) June futures trading around $11.50 and Brent futures just below $20.00. The other important outside markets today see the U.S. dollar index weaker on a corrective pullback from recent gains. The 10-year U.S. Treasury note yield is trading around 0.58% this morning.
The marketplace so far has shown little reaction to a tweet from President Trump Wednesday morning that said, “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” However, this matter is an escalation in U.S.-Iran tensions that will likely get worse before they get better and merits the attention of traders and investors.
Global stock markets were mostly up in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. The U.S. stock indexes are seeing a corrective bounce at mid-week, following solid losses scored on Monday and Tuesday. The U.S. equity traders are watching corporate earnings reports that have started to come out this week, but have so far been mostly overshadowed by the collapse in the global crude oil market.
U.S. economic reports due for release Wednesday include the weekly MBA mortgage applications survey, the monthly house price index and the weekly DOE liquid energy stocks report.
Technically, the gold bulls have the firm overall near-term technical advantage amid price uptrends in place on the daily, weekly and monthly charts. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00.
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