Gold and silver prices down as U.S. stock market remains very wobbly

London (Mar 17)  Gold and silver prices are trading down in early U.S. trading Tuesday, but not in the panic-type fashion seen on Monday. The U.S. stock markets is trading both sides of unchanged as news reports are coming out that are positive on the efforts in finding a vaccine for the coronavirus and also on the treatment of the illness. At the same time reports Tuesday morning are saying the U.S. commercial paper market has seen liquidity dry up, which is very concerning to big corporations that rely on short-term funding. Reports say the Federal Reserve is set to act quickly on the matter and as soon as this morning. April gold futures were last down $12.50 an ounce at $1,474.30. May Comex silver prices were last down $0.481 at $12.335 an ounce.

The gold market in less than two weeks’ time has lost over $200 an ounce from its multi-year high above $1,700. The sharp sell off in gold highlights the “sell what you can” trader/investor mentality that continues to grip the global marketplace. Silver prices have careened to an 11-year low this week, with platinum and palladium also suffering sharp losses.
 The steep price losses across the raw commodity spectrum, led by crude oil, are raising fears of price deflation setting in for the global economy, including some even mentioning a global economic depression as being possible.

Global stock markets were mixed in overnight trading. U.S. stock indexes are presently pointed toward near steady openings when the New York day session begins, following the record-setting losses scored on Monday and which drove the U.S. stock market deeper into bear market territory. Look for another volatile trading session in the U.S. markets.

The U.S. stock market hit its daily lows on Monday during President Trump’s afternoon news conference, in which he painted a bleaker picture of the coronavirus pandemic and its impact on the U.S. economy. He said it could be August or later before things in the U.S. start to return to normal. “Social distancing” has dramatically increased and Trump recommended no public gatherings larger than 10 people for at least the next few weeks. Trump acknowledged the U.S. economy will likely slip into recession for at least a short while this year. Traders took note of Trump’s more somber demeanor at his press conference, as he seemed more conciliatory and less fiery when asked pointed and even nit-picking “gotcha” questions by some reporters.

It’s very likely many small retail businesses in the U.S., which do not have deep financial pockets, will not survive the social distancing safety measures that appear likely to remain in place for weeks to come, or longer. The U.S. government has promised aid to local main street merchants, but the likely cumbersome and slow process of receiving the federal government aid will be too late for many small businesses to stay afloat.

In overnight news, the closely watched German ZEW economic expectations index for March came in at -43.1 versus -15.7 in February and market expectations for a March reading of -30.0.

One positive note in this dire scenario laid out above is that North Americans appear to be taking the coronavirus outbreak much more seriously than many had initially reckoned. Pundits a couple weeks ago were saying North Americans could not be shut in like the Chinese were forced to do by their government. The dramatic shift in the psychology of North American citizens in just a week’s time is a testament to their resolve. China’s economy and commerce are reported to be starting to recover after its citizens were shut in for a few weeks.

One more potential positive on this matter could be that a vaccine for the virus could come much sooner than health experts are now forecasting. This long-time market watcher/reporter covered the energy markets during the 1991 first Gulf War. When Iraqi leader Saddam Hussein and his army were driven out of Kuwait by coalition forces, Saddam set fire to most of the hundreds of Kuwaiti oil wells. The massive fires showed up as big black spots on satellite photos of the entire Middle East. Oil experts said it would be many months or even a couple years before all those fires could be extinguished. Coalition firefighters had all those fires put out in about a month’s time. Sometimes even experts can be well off the mark on their forecasting.

The benchmark 10-year U.S. Treasury note sees its yield around 0.8% Monday, which is about the same as later Monday. The U.S. dollar index is solidly higher in early U.S. trading. Nymex crude oil prices are slightly up and trading around $29.00 a barrel.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, retail sales, industrial production and capacity utilization, the NAHB housing market index, manufacturing and trade inventories, and the Federal Reserve’s FOMC meeting begins.

Live 24 hours gold chart [Kitco Inc.]

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.

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