Gold, silver rally on safe-haven buying, bullish outside markets

JGold and silver prices are solidly higher and near daily highs in midday U.S. trading Wednesday, on safe-haven demand amid a nervous marketplace as the calendar is set to turn to what can be a tumultuous month of October for stock and financial markets. The U.S. dollar index is trading solidly lower at midday, bond yields have also dropped during today's session, and crude oil prices are solidly higher—all bullish daily outside market elements for the metals markets. Gold prices did drop to a nearly 2.5-year low overnight. December gold was last up $30.00 at $1,666.00 and December silver was up $0.468 at $18.805.

A Barron's headline today reads, "The greenback has gone ballistic." The generally strong U.S. dollar is putting serious pressure on the currencies of many smaller countries, which is very worrisome to those who endured currency crises of past decades. The main concern is a general marketplace contagion developing if secondary currencies dislocations and illiquidity spill over into extreme anxiety and lack of confidence in the global financial transactions system. The Chinese yuan hit a record low against the U.S. dollar today. Major economies have taken steps over the years to prevent another global financial market crisis, but when everyone runs for the exit doors at once, even robust systems can be over-run. Any investment bank or big hedge fund that appears to be in trouble may provide the first clue of a much bigger problem developing. Such a scenario would likely prompt a bigger move into the hard assets, safe-haven gold and silver.

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Global stock markets were mostly lower overnight. U.S. stock indexes are higher at midday on short covering. The marketplace was somewhat assuaged overnight when the Bank of England made a surprise announcement that it will begin purchases of U.K. government bonds in order to stabilize the rattled U.K. bond market. The International Monetary Fund said the U.K. government should re-examine its stated plan to stimulate its economy through massive borrowing and bond sales.

Technically, December gold prices hit a nearly 2.5-year low early on today. Prices also scored a bullish "outside day" up today. The gold futures bears still have the solid overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at today's high of $1,669.40 and then at $1,680.00. First support is seen at $1,650.00 and then at $1,635.00. Wyckoff's Market Rating: 1.5.

December silver futures prices scored a bullish "outside day" up today after hitting a three-week low early on. The silver bears still have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at the September low of $17.40. First resistance is seen at this week's high of $19.045 and then at $19.40. Next support is seen at Tuesday's low of $18.295 and then at $18.00. Wyckoff's Market Rating: 2.5.

December N.Y. copper closed up 735 points at 335.70 cents today. Prices closed nearer the session high today and scored a bullish "outside day" up after hitting a nine-week low early on. The copper bears have the firm overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 369.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the July low of 315.55 cents. First resistance is seen at 340.00 cents and then at 348.00 cents. First support is seen at 330.00 cents and then at today's low of 324.30 cents. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff

For Kitco News

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