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Gold Rallies On Safe-Haven Demand As U.S.-China Trade War Looms

Jim Wyckoff  

(Kitco News) - Gold prices are firmly higher in early U.S. trading Wednesday, as anxiety and risk aversion in the world marketplace are keen today, on fears of a major U.S.-China trade war. June Comex gold futures were last up $10.20 an ounce at $1,347.60. May Comex silver was last up $0.058 at $16.45 an ounce.

Fears of a global trade war have ratcheted up a notch after China today announced a big list of U.S. products on which it intends to slap new tariffs. These products include cars, soybeans and airplanes. This action follows a U.S. announcement of new U.S. duties on Chinese imports on Tuesday. U.S. President Trump tweeted Wednesday morning that the U.S. lost the trade war with China years ago, which underscores the U.S. resolve on the matter. While the U.S. and China have said they will begin negotiations to resolve their trade dispute, this tit-for-tat action has the world marketplace experiencing significant anxiety as the world’s number-one and number-two economies square off.

World stock markets were lower overnight. U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins. Safe-haven assets U.S. Treasuries are also rallying today on the keener risk aversion in the marketplace.

The just-released U.S. ADP national employment report showed a rise of 241,000 in March, which is a significant miss to the upside. Forecasters were expecting the number to come in at up 200,000. This report is a precursor to Friday morning’s more important U.S. employment situation report from the Labor Department. Gold prices did back off from their daily highs after this report’s release.

In other overnight news, the March Euro zone consumer price index came in at up 1.4%, year-on-year, which was above market expectations. The February reading was up 1.1%. Still, the numbers are well below the 2.0% inflation rate that the European Central Bank deems an optimum level.

The key “outside markets” on Wednesday morning see the U.S. dollar index slightly lower. Meantime, Nymex crude oil prices are lower and trading just above $62.00 a barrel.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, manufacturers’ shipments and inventories, the ISM non-manufacturing report, and the weekly DOE liquid energy stocks report.

Live 24 hours gold chart [Kitco Inc.]

Technically, June gold bulls have the overall near-term technical advantage. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at the January high of $1,375.50. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,300.00. First resistance is seen at today’s high of $1,351.40 and then at last week’s high of $1,362.60. First support is $1,340.00 and then at the overnight low of $1,335.20. Wyckoff's Market Rating: 6.5

Live 24 hours silver chart [ Kitco Inc. ]

May silver futures bulls and bears are on a level overall near-term technical playing field amid recent choppy and sideways trading. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at the March high of $16.895 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at this week’s high of $16.68 and then at last week’s high of $16.81. Next support is seen at this week’s low of $16.30 and then at last week’s low of $16.195. Wyckoff's Market Rating: 5.0.

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