Gold, Silver Erase Early Price Losses, Rally On Safe-Haven Demand

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Jan 28, 2021 10:49 NY TimeKitco 10AM Silver Fix

(Kitco News, Thurs. Jan. 28th, 2020) – Gold and silver prices are rallying in early U.S. trading Thursday, erasing modest overnight losses. It appears there is safe-haven demand surfacing in the precious metals amid the increasing talk and speculation regarding what could happen to short sellers in the U.S. stock market. Hedge fund managers that short sell stocks are spooked and could be buying gold and silver as a hedge against impending losses in their short-stock trades. February gold futures were last up $13.50 at $1,858.40 and March Comex silver was last up $1.01 at $26.40 an ounce. 

Global stock markets were mostly down overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins and have also erased overnight losses. The S&P 500 stock index on Wednesday had its worst day since October. Trader and investor risk sentiment has eroded a bit this week. The Covid-19 pandemic continues to ravage many countries, including the U.S. and U.K. If the U.S. stock indexes continue to sell off late this week, that would be one early clue of market tops being in place. More and more market watchers are reckoning the U.S. stock market has become very frothy, what with an economy that is awash in easy money from the Federal Reserve.

Importantly, the GameStock/Reddit ordeal playing out in the U.S. stock market appears to have pitted the little guys against the big hedge fund managers, and the little guys won this time. However, there may now be much bigger implications. Said one broker in a morning email dispatch: “Ironically, the GameStop saga may have marked the top of the U.S. tech market despite its shares continuing to climb. Robinhood traders are said to have bought up GameStop shares exposing hedge fund short sellers to multi-billion-dollar losses. While the activity of a small, distressed gaming retailer in the U.S. should not have a significant impact on the rest of the world, there we believe the situation is causing hedge funds and their funders to go ‘risk-off’ and deleverage their investments causing funds to liquidate positions across the board.” This matter appears to be working to support the safe-haven gold and silver markets in the near term, as some fund managers are very queasy. It also could be that silver’s bigger rally than gold on Thursday is partly due to traders/investors or even fund managers viewing that market as a cheaper way to play the keener risk aversion.

In other news, the World Gold Council has reported global demand for gold fell to its lowest level in 13 years during the fourth quarter of 2020. Jewelry buying remained overall weaker due to the pandemic. However, the WGC did say gold demand was bouncing back late last year.

The key “outside markets” today see the U.S. dollar index lower. Meantime, Nymex crude oil futures prices are higher and trading around $52.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note stands at 1.00%.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the first estimate of fourth-quarter gross domestic product, the advance economic indicators report, leading economic indicators, new residential sales and the Kansas City Fed manufacturing survey.

Technically, the February gold futures bulls and bears are on a level overall near-term technical playing field. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,900.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the January low of $1,800.80. First resistance is seen at Wednesday’s high of $1,851.50 and then at Tuesday’s high of $1,860.80. First support is seen at this week’s low of $1,828.40 and then at $1,817.10.

March silver futures bulls and bears are on a level overall near-term technical playing field. Silver bulls’ next upside price objective is closing prices above solid technical resistance at the January high of $28.105 an ounce. The next downside price objective for the bears is closing prices below solid support at the January low of $24.04. First resistance is seen at Wednesday’s high of $25.545 and then at Tuesday’s high of $25.72. Next support is seen at $25.00 and then at this week’s low of $24.715.

Posted by :

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com