Gold prices up as risk appetite recedes late this week

July 10, 2020

New York (July 10)  Gold  prices are moderately higher in early U.S. trading Friday, as risk aversion is keener heading into the weekend. Gold and silver markets remain strongly bullish from a technical perspective, suggesting more upside for both. August gold futures were last up $8.00 an ounce at $1,811.80. September Comex silver prices were last up $0.128 at $19.09 an ounce.

Global stock markets were mostly lower in overnight trading, including in China, where an eight-session winning streak in the Shanghai composite index was halted Friday. The U.S. stock indexes are pointed toward lower openings when the New York day session begins. Trader and investor risk appetite has receded late this week, on growing ideas the U.S. and global economies’ heretofore rapid recoveries are now stalling out. More and more market participants are reckoning global stock markets have rallied too far, too fast, given current, general economic and business conditions.

Said one stock market analyst in a Friday morning email dispatch: “While global equities blissfully ignored the deteriorating economic conditions around the world in the previous quarter, the moment of reckoning could arrive when the U.S. earnings season kicks off next week. The second-quarter results are set to lay bare the pandemic’s impact to a greater extent compared to the previous quarter’s figures and this could prove to be one of Wall Street’s worst earnings seasons. It remains to be seen whether market participants have the stomach to digest such despairing numbers.”

One explanation for the global stock markets’ surprising strength in the face of the pandemic is the huge influx of stimulative cash from central banks that saw part of the cash flow into the stock markets.

The important outside markets today see Nymex crude oil prices lower and trading around $38.75 a barrel. The U.S. dollar index is slightly down early today. The yield on the benchmark U.S. Treasury 10-year note has dipped this week and is currently around the 0.58% level—the lowest since April. The increasing investor demand for U.S. Treasuries suggests “flight-to-quality” moves amid growing uneasiness in the marketplace.

U.S. economic data due for release Friday includes the producer price index.

Technically, the gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $1,779.20. First resistance is seen at $1,825.50 and then at this week’s high of $1,829.80. First support is seen at $1,800.00 and then at $1,789.00.


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