A spooked world marketplace has prompted keen safe-haven demand for gold that has sent the precious metal to a 12-month high above $1,240.00 an ounce in early U.S. trading Thursday. April Comex gold was last up $44.50 at $1,239.00 an ounce. March Comex silver was last up $0.343 at $15.62 an ounce.
Remember just a short while ago when some gold market watchers were proclaiming the yellow metal had forever lost its safe-haven allure? As it appears to have turned out, those proclamations were just a part of the psychology of the marketplace that shows a market is the most very bearish at the very bottom in its price. Gold prices have appreciated around 15% since early January.
There is keen worldwide investor and trader risk aversion Thursday as most world stock markets absorbed sharp losses overnight. Falling crude oil prices, worries about the European financial system and weak overall world economic growth prospects are combining to spook the world marketplace. The Stoxx Europe 600 index was down nearly 4% overnight. Hong Kong’s Hang Seng index was also down around 4% on the day. China and Japan markets were closed Thursday for holidays. The Japanese yen has soared against the U.S. dollar on safe-haven demand from market participants in the Asian region.
U.S. stock indexes were also pointed to sharply lower openings when trading gets under way Thursday.
Safe-haven assets gold and U.S. Treasuries also saw their prices soar Thursday.
There is once again rising concern about European countries’ sovereign debt, as bond yields in several EU countries have risen sharply in recent weeks. The outlier is Germany, whose bonds are considered to be high quality and safe-haven. German bond yields are presently at record lows and in negative territory.
Nymex crude oil prices were trading lower and just above $26.00 a barrel just before the U.S. day session began Wednesday. This week’s selling pressure in Nymex crude has once again pushed prices to near a 12-year low.
In other overnight news, Sweden’s central bank cut its main interest rate even farther, to minus 0.5% from minus 0.35%. The move was not expected and added some anxiety to the world marketplace.
Market watchers will closely scrutinize Fed Chair Janet Yellen’s testimony on the U.S. economy before a U.S. Senate committee Thursday. She spoke to a House committee on the same matter Wednesday and did not say anything to roil the markets–at least not initially. In retrospect, some market watchers deemed Yellen’s remarks to the House members Wednesday as a bit hawkish and as sounding some alarm on recent world markets turbulence. Her remarks Wednesday were at least partly blamed on selling pressure in world stock markets overnight. However, many are doubting the Fed will be able to raise U.S. interest rates this year, as had been its intention until the recent turmoil in world markets.
The World Gold Council has just issued a report saying world gold demand was flat in 2015, but less supply likely in 2016 will be a positive for the precious metal.
U.S. economic data due for release Thursday is light and includes the weekly jobless claims report.
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Wyckoff’s Daily Risk Rating: 4.0 (Trader and investor market risk aversion is highly elevated today.)
(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 5, with 1 being least risk-averse (most risk-on) and 5 being the most risk-averse (risk-off).
Technically, April gold futures prices are in an accelerating seven-week-old uptrend on the daily bar chart and the bulls have the solid overall near-term technical advantage. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00. First resistance is seen at the overnight high of $1,243.00 and then at $1,250.00. First support is seen at $1,232.00 and then at $1,225.00. Wyckoff’s Market Rating: 8.0
March silver bulls also have good upside momentum as a four-week-old uptrend is in place on the daily bar chart. Prices Thursday hit another 3.5-month high. Silver bulls’ next upside price breakout objective is closing December futures prices above solid technical resistance at $16.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.00. First resistance is at the overnight high of $15.745 and then at $16.00. Next support is seen at $15.48 and then at the overnight low of $15.285. Wyckoff’s Market Rating: 7.0.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff