Gold prices soar amid huge rise in US jobless claims, massive Fed stimulus plan

April 9, 2020

New York (Apr 9)  Gold and silver prices are trading sharply up and at daily highs in early U.S. trading Wednesday, on safe-haven demand amid a global economy that has lurched into recession and possibly into depression. Scary U.S. economic data just out, as well a mammoth Federal Reserve stimulus package just announced, are helping to boost the precious metals. June gold futures were last up $35.90 an ounce at $1,719.50. May Comex silver prices were last up $0.385 at $15.59 an ounce.

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.

The Federal Reserve has just announced another $3.2 trillion stimulus/lending plan to support U.S. states, counties and cities ravaged by the Covid-19 pandemic. 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.

Global stock markets were narrowly mixed in overnight trading. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. 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 higher and trading around $26.50 a barrel. Prices last week dropped below $20.00.

Other important markets see the U.S. dollar index weaker this morning. The 10-year U.S. Treasury note yield is trading around 0.73% Thursday morning. Gold prices are solidly higher and trading above $1,700.00 an ounce.

Said one email dispatch from a metals analyst Thursday morning: “ Metals supply/demand balances are a moving target right now, with daily news on mines closing in Mexico, Chile, Peru, South African and Zambia as well as other locations. Metals supply has also been disrupted through boarder closures, port and shipping issues. Many containers remain stranded, making shipments yet more complicated. Hedge funds and CTAs have reduced positions ahead of the Easter break and as the supply/demand picture becomes less clear. Lower demand in China and the West was a major driver on the downside for metals traders. China is now restocking and Germany is coming out of lockdown, showing the way to recovery. Nations with shorter lockdowns will likely gain economic advantage over their trading competitors.”

Other reports out today include the producer price index, monthly wholesale trade, monthly chain store sales and the University of Michigan consumer sentiment survey. Federal Reserve Chairman Jerome Powell will also conduct a webinar today on the impact of the coronavirus on the U.S. economy.

Technically, the gold bulls have the solid overall near-term technical advantage amid a price uptrend in place on the daily, weekly and monthly charts. That strongly suggests the path of least resistance for prices will remain sideways to higher for at least the near term and probably longer. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $1,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00.


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