NOW FOCUS ON SILVER MY FRIEND INSTEAD OF THE GOLD

6 Jan 2020

Gold prices are higher in midday trading Monday, but have backed well down from the overnight nearly seven-year high of $1,590.90, basis February Comex gold. Today’s low-range close hints that the gold bulls have run out of gas on a short-term basis and need a rest, or pause. Meantime, silver futures scored a more-than-three-month high of $18.55, basis March Comex futures. High geopolitical tensions are and will likely continue to support the safe-haven metals. February gold futures were last up $13.80 an ounce at 1,566.20. March Comex silver prices were last down $0.016 at $18.14 an ounce.

The U.S. stock indexes coming well up from their overnight lows also encouraged some profit taking in gold from the short-term futures traders, following the recent good gains.

As I reported early this morning, for the very short-term traders of gold (usually futures markets), here’s an important development: History shows that a big spike up in prices amid higher volatility tends to produce near-term market tops sooner rather than later, after that initial spike up. That means in the coming days the gold market could put in a “near-term” top that will last for a moderate period of time.

Global stock markets are still upset on geopolitical fears following the U.S. drone strike late last week that killed Iran’s leading military figure. Asian and European stocks were down overnight.

The key “outside markets” today see crude oil prices near steady after hitting a 22-month high at $64.72 a barrel overnight. Meantime, the U.S. dollar index is weaker amid a five-week-old downtrend in place on the daily bar chart.

The weekend saw more saber-rattling from the U.S. and Iran. President Trump tweeted that the U.S. has 52 Iranian sites set for attack if Iran retaliates against the U.S. for the killing of its general. Meantime, Iraqi’s government voted to expel U.S. troops from Iraq, which prompted a response from Trump that the U.S. would impose economic sanctions on Iraq if such occurred. Nations around the globe issued proclamations urging restraint on the matter from both the U.S. and Iran. This is arguably the most serious geopolitical development in many years, and whose repercussions will play out for a long time to come. That will likely keep trader and investor risk aversion elevated for some time to come. That’s bullish for safe-haven assets like precious metals and U.S. Treasuries.