Upside price action in gold and silver as USDX, equities back off
New York (Feb 9) Gold and silver futures prices are trading firmer in early U.S. dealings Tuesday, as a weaker U.S. dollar index and a pause in the U.S. stock market rally are giving the metals bulls some strength. Some chart-based buying is also featured early this week from the shorter-term futures traders, as the near-term technical postures for gold and silver have improved a bit. April gold futures were last up $8.70 at $1,842.90 and March Comex silver was last up $0.094 at $27.665 an ounce.
Global stock markets were mixed overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins, after setting record highs Monday. U.S. stock market bulls are taking a pause Tuesday, but risk sentiment remains upbeat as new U.S. Covid-19 cases are starting to decline as vaccinations continue to roll out. Also, hopes are high that the Biden administration will implement a big financial stimulus package by springtime.
The “reflation trade” remains a feature in the global marketplace. Raw commodity markets are rallying, led by crude oil, while U.S. bond yields are rising. The yield on the benchmark 10-year U.S. Treasury note stands at 1.165%. Following is an edited comment from an Asian broker in an email dispatch this morning: “Inflation looks increasingly likely in the West as the yuan appreciates and companies look to restock supply chains as logistics and shortages present greater risk. Rising raw materials costs will be increasingly passed onto consumers. The Chinese yuan has strengthened to Rmb 6.44/U.S. dollar from 7.15 in May 2020, causing the cost of Chinese goods to the West to rise. Raw materials prices are rising, transport costs are higher. Disruption is an increasing cost as shipping containers are blocked or simply not readily available. Western manufacturers, which have enjoyed the benefit of low Asian component costs and fast, reliable and low-cost logistics--all this is changing. Unit costs will rise as manufacturers struggle to raise utilization rates as logistics become less reliable.” To many longtime market watchers it seems unfathomable that all the monetary policy stimulus from central banks and government assistance programs implemented the past year cannot avoid creating problematic price inflation in the not-too-distant future.
In another feature this week, Bitcoin-U.S. dollar prices are higher and hit a new all-time high above $48,000 in early U.S. trading Tuesday. The BC bulls got an electric jolt to the upside when it was just announced Monday morning that Tesla will invest $1.5 billion in Bitcoin and that the electric vehicle maker will incorporate Bitcoin into its car-purchasing operation. More and more it appears that Bitcoin is gaining credibility among the veteran market watchers that may have been early naysayers to the cryptocurrency asset class. It appears that safe-haven gold and silver may be gaining some buying interest from the Bitcoin surge this week, possibly due to notions the growing move by investors into Bitcoin as an asset class will take away some of the allure of the U.S. dollar being what many consider the ultimate safe-haven asset. Bitcoin bulls are in solid technical control to suggest still more upside in the near term.
The key “outside markets” today see the U.S. dollar index lower. Meantime, Nymex crude oil futures prices are lower on profit taking after hitting a 13-month high overnight, and are trading around $57.70 a barrel.
U.S. economic data due for release Tuesday includes the NFIB small business index, weekly chain store sales, and the Johnson Redbook and Goldman Sachs retail sales reports.
Technically, the February gold futures bears have the slight overall near-term technical advantage amid a four-week-old price downtrend in place on the daily chart. However, the bulls are gaining some momentum. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,878.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the November low of $1,771.30. First resistance is seen at $1,850.00 and then at $1,865.00. First support is seen at today’s low of $1,830.30 and then at this week’s low of $1,807.30.
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