The Global Resource For Connecting Buyers and Sellers

Gold At 7-Week High On More Safe-Haven Demand Amid New Worries

(Kitco News) – Gold prices are higher and hit a seven-week high in early trading Wednesday. It’s a very busy day in the marketplace today, with fresh geopolitical concerns fueling more safe-haven buying in the precious metal. More short covering in the gold futures market is also featured, as the rising price is forcing the recent sellers to capitulate. February Comex gold was last up $8.50 at $1,087.00 an ounce. March Comex silver was last down $0.016  at $13.955 an ounce.

There is still keen anxiety in the world marketplace Wednesday and it’s coming from several sources. North Korea said Wednesday it has tested a hydrogen bomb. However, western intelligence sources said the detected blast was not big enough to be an H-Bomb. Still, the world was reminded that North Korea’s rogue regime possesses nuclear weapons despite its world isolation.

There was more downbeat economic data coming out of China Wednesday. The Chinese Caixin services purchasing managers index came in at 50.2 in December from 51.2 in November. The December number was the lowest in 17 months. China’s stock market did see a rebound Wednesday from strong selling pressure seen earlier this week. The world currency markets are jittery as the Chinese yuan sank to a five-year low today, and fell to a record low versus some currencies.

European and U.S. stock markets were under pressure again Wednesday, to continue this week’s rout in the equities markets. Falling crude oil prices and the deflationary implications continue to worry world markets. Brent crude oil futures fell to an 11-year low Wednesday. Nymex crude oil futures dropped to a seven-year low and fell below $35.00 a barrel on Wednesday.

And the tensions in the Middle East remain elevated this week as Iran and Saudi Arabia are in a stare-down after Saudi Arabia executed a cleric who was popular with Iranians.

In other overnight news, in the Euro zone the Markit composite purchasing managers index came in at 54.3 in December from 54.2 in November. A reading of 54.0 was forecast. Euro zone producer prices in November were down 0.2% month-on-month and down 3.2% year-on-year. The inflation data only increased worries about the onset of general price deflation in the European Union.

There is also a heavy slate of U.S. economic data due for release Wednesday, including the weekly MBA mortgage applications survey, the ADP national employment report, the international trade report, the U.S. services PMI, the ISM non-manufacturing report, the weekly DOE liquid energy stocks report, manufacturers’ shipments and inventories, the global services PMI, the latest FOMC meeting minutes, and the World Bank global economic report.

(Note: Follow me on Twitter–@jimwyckoff–for breaking market news.)

Wyckoff’s Daily Risk Rating: 3.5 (Trader and investor market risk aversion is 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, gold bears still have the overall near-term technical advantage, but the bulls are gaining upside momentum this week, to begin to suggest a market bottom is in place. A close on Friday at or near the weekly high would be a better clue that the gold market has hit a near-term bottom. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,100.00. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at last week’s low of $1,056.50. First resistance is seen at today’s high of $1,089.20 and then at $1,098.00. First support is seen at $1,080.00 and then at the overnight low of $1,074.40. Wyckoff’s Market Rating: 3.0

Silver bears have the firm overall near-term technical advantage. Bulls’ next upside price breakout objective is closing December futures prices above solid technical resistance at the December high of $14.64 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the contract low of $13.62. First resistance is at this week’s high of $14.195 and then at $14.425. Next support is seen at last week’s low of $13.75 and then at $13.62. Wyckoff’s Market Rating: 2.0.

By Jim Wyckoff, contributing to Kitco News;
Follow me on Twitter @jimwyckoff