Gold and silver prices are posting good gains in early U.S. trading Wednesday. Safe-haven demand has resurfaced amid worries about the stability of the U.S. Treasury market, amid a U.S.-China trade war that is unfolding. June gold was last up $79.20 at $3,069.40. May silver prices were last up $0.569 at $30.255.
Asian and European stock markets were mostly lower in overnight trading. U.S. stock indexes are pointed to sharply lower openings today in New York. The stock indexes sold off on the morning news that China announced 84% retaliatory tariffs against the U.S. A full-blown trade war between the U.S. and China is under way, with neither side willing to blink.
Importantly, there are increasing marketplace concerns about the U.S. Treasury market and its stability. There is talk in the marketplace that big hedge funds are having to unwind huge interest rate swap positions that included being heavily long U.S. Treasuries, due in part to notions the Trump administration would loosen U.S. bank regulations regarding Treasury holdings, which has not occurred.
Gold prices are sharply higher today on safe-haven demand, due in part to the U.S. Treasury market worries. Broker SP Angel today reports in an email dispatch: “Gold is enjoying a tailwind from Chinese buying over concerns of yuan devaluation amid tariff impacts and the continued deflationary environment, exacerbated by a slumping property market. However, concerns over the amount of leverage currently in the U.S. Treasury market may also push investors into gold as a haven asset. Gold and Treasuries often compete for haven status, with Treasuries historically winning when yields were higher. However, should investors worry about the stability of the U.S. government bond market, gold may provide the obvious alternative. When the Fed intervened in March 2020 with a 100 basis-point emergency cut, gold subsequently rallied around 30% the remainder of the year.” SP Angel added: “Watch this space.”
It’s also entirely possible that China is dumping U.S. Treasuries due to its trade war with the U.S. Reads a Barron’s headline today: “Trump tariffs rock Treasuries.”
The key outside markets today see the U.S. dollar index sharply down, due to the Treasury concerns. Nymex crude oil futures prices are sharply lower, hit a four-year low and are trading around $56.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note presently at 4.384%. Oddly, U.S. Treasury yields are on the rise despite the risk aversion in the general marketplace.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, monthly wholesale trade and the weekly DOE liquid energy stocks report.
Technically, June gold futures bulls have the solid overall near-term technical advantage. This week’s price action suggests the bears are exhausted from the recent selling pressure. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $3,201.60. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $2,970.40. First resistance is seen at $3,100.00 and then at $3,025.00. First support is seen at $3,050.00 and then at $3,025.00. Wyckoff’s Market Rating: 8.0.
May silver futures bulls and bears are on a level overall near-term technical playing field. This week’s price action suggests the bears became exhausted and that a near-term price bottom is in place. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $32.00. The next downside price objective for the bears is closing prices below solid support at this week’s low of $27.545. First resistance is seen at this week’s high of $30.76 and then at $31.00. Next support is seen at the overnight low of $29.255 and then at $29.00. Wyckoff’s Market Rating: 5.0
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Soource: Jim Wyckoff Kitco
