Moonshots in gold, silver continue on safe-haven demand
Gold and silver prices are strongly higher and hit more new record highs in midday U.S. trading Monday. Safe-haven demand is again featured as gold prices overnight pushed well above $5,000 an ounce, with February Comex futures hitting an all-time high of $5,107.90. Silver also hit a record high, with March Comex futures reaching $113.62 an ounce, as of this writing. Bloomberg said the “breakneck rally fueled by U.S. President Donald Trump’s reshaping of international relations and investor flight from sovereign bonds and currencies” is pushing safe-haven demand for precious metals. “Gold’s dramatic gains drives home bullion’s historic role as a gauge of fear in markets, with investors looking to navigate uncertainty and the haven appeal of gold rarely being more attractive.” February gold was last up $121.50 at $5,101.10. March silver prices were up $12.47 at $113.55.
FOMC, many global central banks, meet this week; traders expect no change in U.S. rates. The Federal Reserve’s Open Market Committee (FOMC) and as many as 17 other central banks that meet this week are expected to mostly keep their interest rates unchanged amid global economic uncertainty, and despite pressure on the Fed from President Trump to lower rates. “Central banks in Africa may unveil a wave of easing, while those in other regions, such as Brazil, Canada, and Sweden, are likely to retain current settings. The week ahead will see the release of key economic data, including inflation reports from Australia, Japan, and Brazil, as well as GDP data from the euro region and other countries,” said a Bloomberg report.
“We think most FOMC participants can cite data to support holding rates steady at the meeting. That degree of unity would be seen as a vote of support for Powell, who has come under fierce attack from the White House. The most interesting figures to watch are Governors Christopher Waller and Michelle Bowman: If they vote with the majority to hold steady, they’ll be signaling to Trump that they side with Powell — including on Fed independence. We expect Waller to vote with the majority, but Bowman to dissent,” said Bloomberg Economics.
U.S. dollar index sinks on forex intervention talk. The gold and silver bulls also got a boost today from a sharply lower U.S. dollar index. The U.S. dollar index (a basket of major currencies weighted against the greenback) fell to a four-month low overnight amid the prospect of the U.S. joining Japan in foreign-exchange intervention. The dollar weakened against most major currencies and the Japanese yen rallied as investors debated how any joint intervention to support Japan might further worsen sentiment toward the greenback. A potential currency pact between the U.S. and Japan has reignited discussion on coordinated currency intervention to guide the dollar lower against key trading partners, which could help American exporters compete with rivals. The discussion on a potential currency pact reignited Friday when traders reported that the Federal Reserve Bank of New York had contacted financial institutions to ask about the yen’s exchange rate. Wall Street saw those inquiries as potentially laying the ground for Japan to intervene with help from the U.S., Bloomberg reported.
The other key outside markets today see crude oil prices weaker and trading around $60.50 a barrel. The U.S. dollar index is sharply down and hit a four-month low, while the U.S. 10-year Treasury note yield is presently 4.213%.
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, February gold futures bulls’ next upside price objective is to produce a close above solid resistance at $5,250.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,750.00. First resistance is seen at the overnight record high of $5,107.90 and then at $5,200.00. First support is seen at $5,000.00 and then at $4,950.00. Wyckoff's Market Rating: 10.0.
March silver futures bulls have the strong chart advantage and their next upside price objective is closing prices above solid technical resistance at $125.00. The next downside price objective for the bears is closing prices below solid support at $100.00. First resistance is seen at today’s record high of $113.62 and then at $114.00. Next support is seen at $110.00 and then at $107.50. Wyckoff's Market Rating: 10.0.
