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Should sentiment for the precious metals return to a level more in line with the historical average, demand for gold will skyrocket, Rick Rule, director of Sprott in a panel discussion with Amir Adnani, chairman of GoldMining and CEO of UEC.
Adnani added that investors in the resource sector need to take a long-term view for their time horizon.
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David
While it is a little too early to say that the price correction in gold which began on the 23rd of last month is over, the first signs of a potential bottom have appeared today. Gold pricing did recover this morning, however at the same time, gold traded to the lowest intraday price of $1676 since the intraday low of $1666.50 seen on April 21st.
If this low achieved today holds throughout next week, and gold pricing trades higher we will witness gold trading to a higher low than the previous low. The key will be whether or not gold pricing can move above its most recent high of $1754 achieved on April 23rd.
We have also identified a simple two-day candlestick pattern that can indicate a pivot, or market called a piercing line. This pattern is a two-day candlestick pattern that occurs after the market has been in a defined downtrend. The first day of this pattern begins with a large red candle, which is created when a stock or commodity closes well below its opening price.
The following candle will be composed of a green candle, which is created when a stock or commodity closes well above its opening price. If it also opens below the close of the prior session this creates a price gap between the real body of the previous red candle. The green candle then must close at or above the midpoint of the prior days red candle. Lastly to take the signal one should wait for confirmation which means that the following day is a green candle with a higher high, and higher low than the previous green candle (the bigger the confirming candle the stronger the signal).
Silver traded higher today gaining almost seven cents on the day, with the most active May contract currently fixed at $15.04. The key distinction is that silver is trading below its 21-day exponential moving average and its 50-day moving average. While gold and silver tend to move in tandem, it is quite possible that if we see lower equity prices next week silver will continue to be pressured by its industrial component, rather than act as a safe haven asset.
Gold futures basis the most active contract month (June) closed up by a little over $14 today. As of 4:30 PM EDT gold futures are fixed at $1708.40, which is a net gain of $14.20 on the day. Today’s close is just off the intraday high of $1714.40. Gold never traded below its 50-day moving average. However, yesterday’s decline, as well as today’s opening price were below the 21-day exponential moving average which is currently fixed at $1700.40. Today’s $14 gain put pricing well above that average.
Our technical studies indicate that there is minor resistance at $1710.70, which is the 23% Fibonacci retracement, with the next level of resistance at $1764 which is the high that occurred on the 23rd of last month. With major resistance at $1788, which remains the highest value gold has obtained this year.
Wishing you as always good trading and good health,
By Gary Wagner
David
Today market participants witnessed a rare event with the U.S. equities rallying approximately 7% on the day based upon diminishing fears of the coronavirus, as the safe haven class rose between 3.6% (gold) and 5.39% (Silver) based upon the fact that the coronavirus is about to reach its apex in the United States this week.
This seemingly large swing in market sentiment is viewing the glass both half-empty and half-full at the same time. While it is quite logical to see the safe haven asset class rally as the United States digs in for a week that should see cases of the COVID-19 continue to rise as it reaches its apex, today’s relief rally in U.S. equities could be short-lived.
Although we are seeing market sentiment in global equities becoming more bullish, we should continue to see financial fallout from certain sectors including the airlines, and travel industry as a whole continue to contract.
One of the most important factors to look at in today’s moves in the financial markets is that although equities have rebounded a greater percentage than gold, gold is the only asset class to now be trading above pre-pandemic levels.
Today gold futures based upon the most active June contract gained significant ground. As of 4:42 PM EST June contracts are currently trading up $58.50, a gain of 3.6%, and fixed at approximately $1705 per ounce. Silver futures surged approximately 5.46% and are currently up $0.79 and fixed at $15.25.
What is also noteworthy and highly unusual is the spread between spot gold and gold futures. This spread continues to widen with the current spread reaching a differential of $49 today with spot gold currently fixed at $1657 up $41, and gold futures currently at between $1705 and $1706. One possible explanation for this spread that is widening is the expectation that the coronavirus in the United States will get worse before it gets better.
The quandary therefore is, can the US equities markets and the tremendous rally we witness today be sustainable throughout the week? While the answer to that question is unknown, market sentiment for the safe haven class with gold and silver in particular will continue to hold value if not rise throughout the week.
On a technical basis we see gold has formed an inverse head and shoulders formation with today’s move in gold futures breaking strongly above the shoulders indicating higher pricing ahead. The rally in gold futures could move as high as $1800 in the next two weeks.
Wishing you as always good trading,
By Gary Wagner
Contributing to kitco.com
David
Gold futures settled lower on Tuesday for the first time in four sessions as U.S. stocks looked to rebound from their steepest one-day loss since 2008 and as government bond yields jumped off historic lows seen after a coronavirus and crude-oil sparked plunge on Monda
“Gold has not been the clear-cut winning trade as many investors are also looking to scale back into equities,” Edward Moya, senior market analyst at Oanda, told MarketWatch. “As [Treasury] yields show signs of stabilizing, gold will somewhat struggle in the short-term.”
Still, Moya believes that gold, along with U.S. Treasurys will “remain the favored safe-haven traders as financial markets navigate through rising global recessionary risks, deflationary pressures and falling consumer confidence.”
Gold for April delivery GCJ20, +0.18% on Comex lost $15.40, or 0.9%, to settle at $1,660.30 an ounce, after posting a slight 0.2% gain on Monday.
May silver SIK20, +0.59%, fell by 9.9 cents, or 0.6%, at $16.955 an ounce, after falling 1.2% a day ago.
The rebound in risk asset prices Tuesday was attributed to expectation of additional fiscal stimulus from the U.S. government a day after U.S. equities saw their largest daily decline since the 2008 financial crisis. President Donald Trump floated the idea of payroll tax cut and a number of other measures intended to help limit the damage from the coronavirus on supply chains and local economies as a number of countries and regions have instituted lockdowns to contain or mitigate the viral outbreak.
Talk of the stimulus measures “eased economic concerns overnight which supported the stock market and pressured gold prices,” analysts at Zaner Metals wrote in a daily note. “It also lent support to silver, which had reacted opposite to gold and sold off in reaction to Monday’s sharp stock market declines.”
The “recovery in the stock market reduces the safe-haven impetus to buy gold but there is talk of additional monetary measures that could ultimately support the market,” the Zaner analysts said.
Moya however, believes that “gold will likely climb higher as the bar has been set too high for global fiscal and monetary stimulus.”
Disappointment with the ability of policies from the European Central Bank U.S. Federal Reserve, Bank of England, and Bank of Japan to combat an economic downturn resulting from the coronavirus epidemic “could all trigger the next rally” for gold, he said.
“The coronavirus spread is also intensifying and until the US has the ability to properly test for it we could see the uncertainty continue to weigh on risk sentiment, which would be positive for gold.” The coronavirus epidemic from China that has sickened at least 115,000 and claimed more than 4,000 lives world-wide.
In Tuesday dealings the 10-year U.S. Treasury note yield TMUBMUSD10Y, 0.667% was rebounding from its Monday nadir, rising 16 basis points to 0.67% from 0.50% the previous session. However, the benchmark debt yield was still firmly below 1% which has been a major support of for bullion price gains, as well as weakness in the U.S. dollar.
In other metals trading, copper for May delivery HGK20, +0.23% added 0.4% to $2.5215 a pound. April platinum PLJ20, +0.95% rose 0.8% to $869.40 an ounce, but June palladium PAM20, +0.06% settle at $2,317.40 an ounce, down 3.7%.
Published: March 10, 2020 at 2:09 p.m. ET
By Myra P. Saefong and Mark DeCambre
David