Jim Wyckoff – Friday February 21, 2020 07:55
Precious Metals News
Gold and silver prices are solidly up in early U.S. futures trading Friday. Gold notched another seven-year high, while silver hit a six-week high, on safe-haven demand as the negative effects of the coronavirus outbreak on the global economy remain highly uncertain but appear to be increasing. April gold futures hit a new contract high overnight and were last up $17.10 an ounce at $1,637.60. March Comex silver prices were last up $0.161 at $18.48 an ounce.
Asian and European shares were mostly down overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. Risk-off trading attitudes are keen as the trading week winds down, as the coronavirus continues to spread in Asia, and its impact on the global economy is perceived to be getting much more serious.
Reports overnight said China’s auto sales fell over 90% in February as coronavirus restrictions prevented buyers from visiting car dealerships. Over 21 million autos were sold in China in 2019, making China the world’s largest auto market. The Hubei province is still in lock-down and officials there have pushed back the date for businesses to reopen to 10 March. That date could be further delayed if covid-19 is not contained by then.
China recorded over 800 new cases Thursday (up from around 400 Wednesday), with the total number of afflicted now at over 75,000 and over 2,200 dead. South Korea has reported over 200 confirmed covid-19 cases. The capital has banned all rallies in major downtown areas.
Options may be cash settled or physically delivered. ETF options, like SPY, expire into a position in the ETF. Index options, like the comparable Mini-SPX, are cash settled. This key difference is particularly important when we talk about “gap risk.”
From a marketplace perspective the covid-10, or coronavirus, situation is still very fluid regarding the economic impact on major world economies. Traders and investors are vacillating daily on whether the outbreak’s rate of spread is accelerating or declining. This uncertainty will continue to support buying interest in safe-haven assets like gold, U.S. Treasuries and the U.S. dollar, and the movement of money out of riskier assets like stocks. Gold prices hit another seven-year high of around $1,640 overnight.
Manufacturing indexes from the major world economies are starting to show the negative effects of the covid-19 outbreak. U.S. companies are also mentioning the illness as impacting their bottom lines when earnings reports are released.
The key outside markets today see crude oil prices lower and trading around $53.00 a barrel. Meantime, the U.S. dollar index is weaker on a corrective pullback after hitting a multi-month high Thursday.
U.S. economic data due for release Friday includes the US flash manufacturing PMI, the services PMI, and existing home sales.
Technically, the gold bulls have the strong overall near-term technical advantage to suggest still more upside in the near term. A three-month-old price uptrend is in place on the daily chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $1,650.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $1,581.80. First resistance is seen at the overnight high of $1,639.40 and then at $1,650.00. First support is seen at the overnight low of $1,621.60 and then at $1,619.60. Wyckoff’s Market Rating: 8.5
March silver futures bulls have the overall near-term technical advantage with this week’s strong gains. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the January high of $18.895 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at this week’s low of $17.67. First resistance is seen at today’s high of $18.57 and then at $18.75. Next support is seen at the overnight low of $18.335 and then at Wednesday’s low of $18.135. Wyckoff’s Market Rating: 6.5.
By Jim Wyckoff
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