Gold, silver lower in choppy, volatile trading
Gold and silver prices are lower and in the middle of their wide daily trading ranges in midday U.S. trading Monday, after dropping to four-week lows overnight and in the aftermath of last Friday’s record-setting session. April gold was last down $39.70 at $4,707.50. March silver prices were down $0.61 at $77.90.
A rebound in the U.S. stock indexes and in the U.S. dollar index, as well as sharply lower crude oil futures prices, are bearish outside-market elements working against the precious metals bulls on the first day of the trading week and of the trading month.
Overnight, March silver dropped to a low of $71.20 an ounce, after last Thursday hitting a record high of $121.785. April gold futures overnight hit a low of $4,423.20 an ounce after last Thursday hitting a record high of $4,626.80.
The CME Group over the weekend again raised margin requirements for the two metals futures contracts.
Part of the pressure on the metals was due to President Trump on Friday nominating Kevin Warsh to lead the Federal Reserve, which sent the U.S. dollar index higher. Warsh has been known to be more hawkish on U.S. monetary policy.
Some blamed Friday’s the bloodbath in gold and silver markets on Chinese speculators loading up on leveraged long-side bets using futures and options—and possibly not understanding the potential implications of the huge leverage involved. Bloomberg reported Chinese metals traders have racked up losses totaling at least 1 billion yuan after one of their counterparties fled the country leaving deals unfinished. Xu Maohua, a metals dealer also known as “The Hat,” went into hiding. He was reportedly central to a network that helped the state-owned SDIC Commodities subsidiary boost sales via irregular deals that skirted Chinese government rules.
The other key outside market today sees the U.S. 10-year Treasury note yield presently at 4.22%.
Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.
Technically, price action in April gold futures last week formed a big and bearish “key reversal” down on the daily bar chart, which is one chart clue that a market top is in place. Bulls’ next upside price objective is to produce a close above solid resistance at $5,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,250.00. First resistance is seen at today’s high of $4,905.60 and then at $5,000.00. First support is seen at $4,600.00 and then at $4,500.00. Wyckoff's Market Rating: 5.5.
March silver futures bulls are fading. The next upside price objective is closing prices above solid technical resistance at $100.00. The next downside price objective for the bears is closing prices below solid support at $70.00. First resistance is seen at the overnight high of $88.00 and then at $90.00. Next support is seen at $75.00 and then at the overnight low of $71.20. Wyckoff's Market Rating: 5.0.
