Slight price gains for gold, silver on short covering

(Kitco News) – Gold and silver prices are slightly up in early U.S. trading Tuesday, on mild corrective bounces following recent selling pressure. Short covering (the buying back of previously sold, or short, futures positions) from the shorter-term futures traders is featured. February gold was last up $3.00 at $2,025.20. March silver was last up $0.094 at $22.39.

Asian and European stock markets were mixed overnight. U.S. stock index futures are set to open mixed when the New York day session begins. The S&P and Nasdaq indexes hit record highs Monday as risk appetite in the general marketplace has up-ticked just recently. Reads a Barron’s headline today: “Fed rate cut looks more distant, but soft landing’s on track.” The rallying U.S. stock indexes are a bearish element for the gold and silver markets, as equities are a competing asset class.

In overnight news, reports said China’s government is considering a $280 billion cash infusion to stabilize its eroding stock market. China held its 1-year and 5-year loan prime rates steady on Monday and then followed with the news today to bolster its stock market. The Shanghai Composite Index hit a 5-year low this month. The news of a potential government cash infusion lifted the Shanghai index by 0.5% while the Shenzhen Component Index rose around 1.5%. China’s potential new stimulus is friendly for gold and silver, as it suggests improving consumer and commercial demand coming from the world’s second-largest economy.

In other news, the Bank of Japan kept its monetary policy steady at its meeting Tuesday. The BOJ kept its deposit rate at minus 0.1% and kept its 10-year bond yield target at around zero percent.

The key outside markets today see the U.S. dollar index slightly higher. Nymex crude oil prices are weaker and trading around $74.00 a barrel. Meantime, the yield on the benchmark U.S. Treasury 10-year note is presently fetching 4.128%.

U.S. economic data due out Tuesday includes the weekly Johnson Redbook retail sales report and the Richmond Fed business survey.

Technically, the gold futures bulls have the overall near-term technical advantage but have faded a bit. Prices are still in a three-month-old uptrend on the daily bar chart, but just barely. Bulls’ next upside price objective is to produce a close in March futures above solid resistance at last week’s high of $2,062.80. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at the overnight high of $2,039.30 and then at $2,050.00. First support is seen at this week’s low of $2,017.40 and then at the January low of $2,004.60. Wyckoff’s Market Rating: 6.0.

The silver bears have the firm overall near-term technical advantage. Prices hit a three-month low Monday and are in a six-week-old downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at $24.00. The next downside price objective for the bears is closing prices below solid support at the October low of $21.17. First resistance is seen at the overnight high of $22.555 and then at this week’s high of $22.78. Next support is seen at the overnight low of $22.165 and then at $22.00. Wyckoff’s Market Rating: 3.0.

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