Gold Ends Mixed, Hits 4-Week High; Gains Pared by Firmer U.S. Dollar, Lower Oil
New York (Oct 15) Gold futures prices ended the U.S. day session with moderate gains and hit a five-week high on safe-haven demand Wednesday. A litany of worries has injected serious fear into the market place, highlighted by plunging world stock markets. December Comex gold was last up $8.10 at $1,242.40 an ounce. Spot gold was last quoted up $10.00 at $1,242.75. December Comex silver last traded up $0.027 at $17.43 an ounce.
Pick your poison for today’s keen trader and investor anxiety: Ebola, poor U.S. economic data issued today, a slumping European Union economy, plunging crude oil prices, or the other geopolitical hot spots that have been on and off the front burner of the market place for months. It’s likely they all have combined to produce major risk aversion. That’s bearish for stocks and bullish for gold, U.S. Treasuries and the U.S. dollar—even though the greenback on this day suffered losses.
The September U.S. retail sales report came in a bit weaker than expected Wednesday morning, at down 0.3%. Also, there was a sharp drop in the Empire State manufacturing index Wednesday morning. And the producer price index fell by 0.1% in September, which was a bigger drop than expected. Combined, this U.S. data was deemed downbeat by traders and investors and helped to lift gold prices back above unchanged and sink the stock market.
The Ebola disease that is on U.S. soil is spreading fear, founded or not. A news conference by the Center for Disease Control at midday was not comforting to the public.
U.S. Treasury bond and note futures prices soared to contract highs Wednesday. While stock market traders and investors like to watch the VIX (volatility) index to gauge investor uncertainty in the market place, I believe the better gauge for the entire markets sphere is the U.S. Treasury markets. Right now, the U.S. Treasuries are telling traders and investors to exercise extreme caution—maybe even to the degree that something really upsetting to markets could be just over the horizon.
In overnight news, there was a tame report on inflation coming out of China. China’s overall inflation rate was pegged at 1.6% in September, year-on-year—the lowest rate since 2010. The slowing inflation rate also suggests slowing demand for goods in China, and also synchs up with recent worldwide inflation reports that show very low, and even worrisomely low, inflation levels.
In a signal of the worries about deflation, especially in the European Union, the German government Wednesday sold two-year notes with a near-record low and a negative yield—at minus 0.06 percent. Read this as also indicating extreme investor caution in Europe. European stock markets were under pressure again Wednesday due to the economic woes presently gripping the European Union.
And speaking of deflation, a main feature in the market place recently has been the spike lower in crude oil prices, with Nymex crude dropping to a two-year low of $80.01 a barrel Wednesday. This plunge in crude oil could be a watershed moment in the energy world. It appears the major upsurge in U.S. domestic crude oil production in recent years has finally broken the back of the OPEC oil cartel. OPEC is presently in disarray, with its members now just trying to hold on to their market share. I’m confident that crude oil prices will at least temporarily dip into the $70s-per-barrel region in the coming weeks, or sooner. Falling crude oil prices are a good thing for world energy consumers, but not a good thing for raw commodity market bulls, or those worried about world price deflation. The steep drop in crude oil prices just recently has added to the uncertainty in the market place.
Not surprisingly to many market watchers there is growing talk the U.S. Federal Reserve in the coming months may have to turn back on the money-printing-presses and introduce a fresh round of quantitative easing, given the ill health of world economies that is likely to also restrict U.S. economic growth. Most economists agree there are very few worse conditions that can exist in an economy than serious price deflation.
The London P.M. gold fix was $1,237.50 versus the previous London A.M. fixing of $1,223.50.
Technically, December gold futures prices closed nearer the session high Wednesday, hit a five-week high and scored a big and bullish “outside day” up on the daily bar chart. There are early clues a near-term market bottom is in place for gold. However, gold bears still have the overall near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,260.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,217.60. First resistance is seen at Wednesday’s high of $1,250.30 and then at $1,255.00. First support is seen at $1,237.00 and then at $1,230.00. Wyckoff’s Market Rating: 3.5
December silver futures closed near mid-range Wednesday and did hit a three-week high early on. More tepid short covering was featured. The silver bears still have the firm overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.00 an ounce.
Source: KitcoNews
