(Kitco News) – Gold prices are higher and hit a two-month high Thursday, on more safe-haven demand amid geopolitical tensions and plunging world stock markets. Importantly, the near-term technical posture for gold has improved markedly this week, which is prompting short covering in the futures market and fresh chart-based buying. February Comex gold was last up $11.40 at $1,103.20 an ounce. March Comex silver was last up $0.119 at $14.095 an ounce.
World stock markets are under solid selling pressure again Thursday as trader and investor anxiety in the world market place remains elevated on this first trading week of the year. China’s stock market traded for only a half-hour Thursday and then circuit-breakers kicked in to halt trading for the rest of the session. It was the second time this week that trading in Chinese stocks was halted by circuit-breakers. Asian investors were also spooked when Chinese monetary authorities devalued the yuan again. The heavy selling in China quickly spread throughout Asia, including Japanese, Hong Kong and Australian stock markets. European stock markets also saw strong selling pressure Thursday.
U.S. stock indexes are also sharply lower Thursday morning and hit three-month lows overnight. Nymex crude oil futures dropped to a 12-year low below $32.00 a barrel Thursday, to add to the fear and uncertainty in the marketplace. Brent crude oil futures also dropped to a 12-year low. The raw commodity sector has been hit hard this week by fears of slowing world economic growth sapping demand for many raw commodities. Weak economic data from China was reported earlier this week. China is the world’s largest raw commodity importer.
Other very worrisome matters for the markets this week include North Korea on Wednesday saying it had 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 isolation. The tensions in the Middle East remain high this week as Iran and Saudi Arabia are in a stare-down after Saudi Arabia executed a cleric who was popular with Iranians.
Other perceived safe-haven assets are also performing well this week, including U.S. Treasuries and the U.S. dollar.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job cuts report, and monthly chain store sales. With all the other markets-moving events this week, traders and investors are less-focused on Friday’s U.S. jobs report, which is arguably the most important U.S. economic report of the month. Friday’s non-farm payrolls component of the Labor Department’s employment report is expected to show a 210,000 rise in December. Still, the jobs data is likely to have a significant impact on many markets.
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Wyckoff’s Daily Risk Rating: 3.5 (Trader and investor market risk aversion is elevated again 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 good upside momentum this week, to suggest a market bottom is in place. Price action this week has produced a bullish upside “breakout” from the sideways trading range at lower levels seen the past month. A close on Friday at or near the weekly high would be another solid clue 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 $1,125.00. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at $1,070.00. First resistance is seen at today’s high of $1,104.60 and then at $1,110.00. First support is seen at the overnight low of $1,091.10 and then at $1,080.00. Wyckoff’s Market Rating: 4.0
Silver bears still have the firm overall near-term technical advantage, as this market does not have the safe-haven status that does gold. Thus, silver is feeling the negative impact of plunging crude oil prices this week. Silver 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 the overnight low of $13.92 and then at last week’s low of $13.75. Wyckoff’s Market Rating: 2.0.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff
