Gold price down as stock markets resume rallies

June 17, 2020

London (June 17)  Gold  prices are moderately lower in early U.S. trading Wednesday, as global equity markets have jumped back into rally modes following last week’s pullbacks. That’s negative for safe-haven gold and silver markets. August gold futures were last down $12.30 an ounce at $1,724.30. July Comex silver prices were last up $0.013 at $17.67 an ounce.

Global stock markets were mostly up in overnight trading. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Traders and investors are weighing the bullish aspects of generally faster rebounds in world economies than many had expected versus the bearish element of a resurgence in Covid-19 reported cases in some regions of the globe, including some U.S. states. At present, it appears the global economic growth factor is winning out. Skeptics can argue the rally in world stock markets is mainly due to the floods of central-bank infused cash that have hit the global financial system.

In overnight news, the Euro zone May consumer price index came out at -0.1% from April and up 0.1%, year-on-year. Deflationary concerns are still at the forefront for central bankers. However, a Wall Street Journal article at mid-week is headlined “Few Are Prepared for the Risk of Inflation Era After Recession.” The story says the 2008 financial crisis and the big influx of central bank liquidity into the financial systems then produced no problematic inflation. However, the article says things are different now and at present “the markets may have it completely wrong” on the inflation matter.

There are a couple of geopolitical developments that bear watching. North Korea has ramped up its provocation of South Korea in recent days. Also, a clash between Indian and Chinese soldiers in their border region is the first military conflict between the two nations in decades.

Fed Chairman Jerome Powell on Wednesday offers up his second and final day of testimony to the U.S. Congress on the health of the U.S. economy and its recovery prospects—today to a House of Representatives panel. His comments to a Senate committee on Tuesday produced no significant surprises.

The important outside markets early today see the U.S. dollar index firmer. Meantime, Nymex crude oil prices are lower and trading around $38.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.75% level.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential construction and the weekly DOE liquid energy stocks report.

Technically, the gold bulls have the firm overall near-term technical advantage amid choppy and sideways trading at higher levels. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $1,761.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at this week’s high of $1,743.80 and then at $1,750.00. First support is seen at the overnight low of $1,717.30 and then at $1,700.00.


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