Gold Prices Soar To 7.5-yr. High As Fed Drops "Atomic Bomb"

(April 9,2020 - Jim Wyckoff)

Gold prices are trading sharply up and at a 7.5-year high near $1,750 in midday U.S. futures trading Wednesday, on safe-haven demand amid a global economy that has lurched into recession and possibly into depression. More scary U.S. economic data out today, as well a mammoth Federal Reserve stimulus package announced, are helping to boost the precious metals. June gold futures were last up $61.30 an ounce at $1,745.90. May Comex silver prices were last up $0.705 at $15.91 an ounce.

The Federal Reserve Thursday morning announced another $2.3 trillion stimulus/lending plan to support U.S. states, counties and cities ravaged by the Covid-19 pandemic. This dwarfs previous stimulus packages from the Fed and the federal government, which one U.S. Treasury secretary several years ago deemed a “bazooka.” Today’s move was the atomic bomb to the bazooka of years ago. It seems inconceivable that this gargantuan economic and monetary stimulus from the U.S. government cannot cause rising and even problematic price inflation down the road.

The latest U.S. weekly jobless claims report showed a rise of 6.6 million, which is above expectations for a rise of 5 million and follows last week’s rise of over 6 million and a rise of over 3 million the week before that.

Global stock markets were narrowly mixed in overnight trading. U.S. stock indexes are solidly higher in midday New York day session trading. This is the last trading day of the week for most markets, ahead of the Good Friday holiday and the Easter weekend. Stock market bulls have had a good week. The U.S. stock indexes have seen near-term price uptrends develop, which suggest at least near-term lows are in place. While the Covid-19 pandemic continues to kill thousands worldwide, the rate of the spread of the illness appears to be slowing. The question among traders and investors now is, if the curve of infections has indeed flattened when will governments restart their crippled economies. May 1 is probably the most optimistic date for a partial U.S. economy restart.

Also in focus today is an OPEC (plus Russia) teleconference meeting to discuss significant crude oil production cuts. Latest reports say Russia is planning a big cut. Many oil market watchers are looking for a collective cut of 10 to 15 million barrels a day. A Texas oil regulator said his state could also cut its oil production. Speculation that major cuts in global oil production will be agreed upon by the major producers has rallied the crude oil futures markets the past week. Nymex crude oil prices are modestly higher and trading around $25.25 a barrel. Prices last week dropped below $20.00.

Other important markets see the U.S. dollar index lower at midday. The 10-year U.S. Treasury note yield is trading around 0.71% Thursday.

Technically, June gold futures bulls have the strong overall near-term technical advantage and gained more power today. More upside is likely in the near term. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,800.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,670.00. First resistance is seen at $1,750.00 and then at $1,775.00. First support is seen at $1,725.00 and then at $1,700.00. Wyckoff's Market Rating: 9.0

May silver futures hit a four-week high today and the bulls have the overall near-term technical advantage, and gained more power today. Prices are in a three-week-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.50. First resistance is seen at $16.00 and then at $16.25. Next support is seen at $15.50 and then at today’s low of $15.175. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed down 50 points at 225.55 cents today. Prices closed nearer the session low today. The copper bulls and bears are on a level overall near-term technical playing field. A price downtrend has been negated on the daily chart and now an uptrend is beginning. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 240.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 215.00 cents. First resistance is seen at today’s high of 228.85 cents and then at this week’s high of 231.75 cents. First support is seen at 221.85 and then at this week’s low of 218.20 cents. Wyckoff's Market Rating: 5.0.