Gold and silver prices up on safe-haven bids amid U.S.- China tensions
New York (May 4) Gold and silver prices are posting good gains in early U.S. trading Monday, on safe-haven demand amid increasing U.S.-China tensions that threaten another trade war, or worse. June gold futures were last up $17.40 an ounce at $1,718.80. July Comex silver prices were last up $0.152 at $15.015 an ounce.
The U.S. is ratcheting up its rhetoric blaming China for delaying reporting of the coronavirus outbreak in its early stages, and even implying the virus could have come from a Wuhan laboratory. This escalation in U.S.-China tensions could thwart the partial trade agreement the world’s two largest economies reached in January. President Trump has threatened new trade tariffs and other sanctions could be levied against China.
Global stock markets were mostly down in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins. On the front burner of the market place this week is strained U.S.-China relations. The Covid-19 pandemic and its destructive impact on the global economy also continue in focus. Purchasing managers’ surveys from around the world, released Friday and Monday, show unprecedented contraction in that important sector of economies during the month of April.
Said one market analyst in a morning email dispatch Monday: “The next two to three weeks are going to be extremely critical on two fronts: health and the economy. No one knows with a high degree of certainty how the Covid-19 curve will play out. While we all hope it slopes downward. There is no guarantee it will, especially with lockdown periods coming to an end. If cases begin to grow and the curve steepens, the chances are high of returning to another phase of complete shutdown. That would put economies on freeze again and the only direction for stocks to head then is down. The other risk factor is a new trade war between the U.S. and China, which is the last thing investors want to hear at this stage.”
The European Central Bank on Monday forecast sharply lower economic growth and inflation for the bloc in 2020. The ECB sees Euro zone GDP down 5.5% and inflation at 0.4% in 2020. The ECB in January forecast inflation at 1.2% in 2020.
The important outside markets see Nymex crude oil prices lower lower and trading around $18.35 a barrel in June futures. The U.S. dollar index is higher today after the greenback bulls faded badly last week. The 10-year U.S. Treasury note yield is trading around 0.6% this morning.
U.S. economic reports out Monday include the ISM New York report on business, manufacturers’ shipments and inventories and the global manufacturing PMI.
Technically, the gold bulls have the overall near-term technical advantage and are keeping alive an uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the April high of $1,788.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,666.20. First resistance is seen at the overnight high of $1,726.00 and then at $1,737.00. First support is seen at $1,700.00 and then at $1,676.00.
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