Gold, silver see slight price weakness, but risk aversion rising

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(Wallace Refiners) – Gold and silver futures prices are slightly lower in early U.S. trading Tuesday. Don’t be surprised to see bulls step in to buy the modest overnight dip because trader and investor risk appetite is waning as the raging Covid-19 pandemic is taking a steady toll on marketplace psychology. A lower U.S. dollar index on this day is also working in favor of the precious metals bulls. December gold futures were last down $0.80 at $1,8870.00 and December Comex silver was last down $0.087 at $24.72 an ounce.

Global stock markets were mixed overnight, while U.S. stock indexes are pointed toward mixed to lower openings when the New York day session begins. The Dow and S&P 500 stock indexes had record-high closes Monday. However, more and more U.S. states are imposing restrictions on businesses and public gatherings, as Covid-19 rages and many hospital beds are full or close to it. This atmosphere in the U.S. and in Europe cannot help but dent trader and investor risk appetite heading into holidays that are likely to see families separated. Despite the very encouraging news on the vaccine front seen recently, there are dark days that lie ahead for the U.S., Europe and other countries hard hit by the pandemic.

It could also be that trader/investor sentiment has been somewhat dented by reports the Trump administration is planning to take a very hard line on China over the next two months, before Trump leaves office, including reportedly taking some steps that the incoming Biden administration would find hard to roll back. Just today, the U.S. Securities and Exchange Commission (SEC) came out with a plan to require Chinese companies traded on U.S. stock exchanges to have auditors overseen by the U.S. If the Chinese firms won’t comply they get shut out of U.S. stock exchanges.

It’s a big U.S. reports day, highlighted by retail sales for October that are forecast to be up 0.5% from September.

It’s worth mentioning that the “softs” futures markets (coffee, cocoa, sugar, orange juice and cotton) all had big upside days Monday, with most of those markets hitting multi-month highs. Part of those gains may be due to analysts at Citibank making a call that the U.S. dollar will decline by up to 20% in 2021. Most raw commodities for sale on the world market are priced in U.S. dollars. When the greenback declines, it makes those commodities cheaper to purchase in non-U.S. currency—possibly leading to more demand. Analysts at Citibank believe the Federal Reserve will maintain a very easy monetary policy even if inflation rises alongside the U.S. economy’s expected recovery, which in turn would prompt U.S. government bond and note yields to rise. Keep in mind these hotshot prognosticators like Citi and Goldman Sachs don’t have any better track records at calling major market moves than the other banks or brokers/analysts. The only difference may be that the big wheels front-loaded their trades and then made their calls public.

The U.S. dollar index is lower again early today. The other important outside market sees crude oil prices near steady and trading around $41.30 a barrel. The yield on the benchmark 10-year U.S. Treasury note futures is currently trading at 0.89%.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, retail sales, import and export prices, industrial production and capacity utilization, the NAHB housing index, manufacturing and trade inventories, and Treasury international capital data.

Technically, the December gold futures bulls still have the overall near-term technical advantage but trading has been choppy. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at the November high of $1,966.10. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the November low of $1,848.00. First resistance is seen at this week’s high of $1,898.00 and then at $1,900.00. First support is seen at $1,875.00 and then at this week’s low of $1,861.50. Wyckoff’s Market Rating: 6.5

December silver futures bulls have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $27.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the October low of $22.625. First resistance is seen at this week’s high of $25.155 and then at $25.50. Next support is seen at this week’s low of $24.255 and then at $24.00. Wyckoff’s Market Rating: 6.5.