Precious Metals Surge Amid Safe Haven Buying

February 8th, 2016 by

gold-rallyBoth gold and silver were sharply higher as markets opened in New York on Monday thanks to a strong wave of safe haven buying. With stock futures way down and crude oil prices falling yet again, it seems that investors are searching for safety anywhere they can find it. That means Treasurys, the U.S. dollar, and especially precious metals.

The spot gold price surged $17 per ounce to as high as $1,193/oz at 10:30 am ET, a fresh 3-and-½-month high. Meanwhile, silver was 32¢ per ounce (+2.1%) higher at $15.43/oz. Both of the Platinum Group Metals advanced as well, with platinum adding 1.5% to $930/oz and palladium trading at about $510/oz.

Bad News Around the Markets

china-stockAcross the financial markets, people are worried. The disastrous January for stocks has not been followed by anything resembling a swift rebound. U.S. stock indices opened about 2% in the red on Monday morning, following European shares lower.

The markets in Shanghai will be closed for the Chinese Lunar New Year, which begins today and lasts roughly two weeks. Despite China’s absence from the global financial markets due to the holiday, gold-buying has still managed to push prices up through several key pivot levels. In fact, the spot gold price has risen by about $110 per ounce (+10%) over the last month alone.

global crashGold also rose in spite of the dollar seeing stronger demand. The USD clocked in above 97.1 on the DXY index this morning, though the Japanese yen also saw confirmation of its traditional role as safe haven, firming up to 116 per dollar for the first time since 2014. At the same time, however, currency traders are increasingly being replaced by computer algorithms, changing the landscape of the forex market.

Other key concerns center around a lack of liquidity in the bond markets, which is always a sign that the gears of the economy are grinding to an alarmingly slow pace; if these gears halt, the normal functioning of global trade and investment goes out the window. Benchmark 10-year Treasury yields are all the way down to 1.78% this morning, another worrisome indicator. Recession risk inside and outside the U.S. remains a constant concern.

Technical Shift

For the first time in many months, the bulls are firmly in control of the gold and silver trade. This is owed to the fact that both metals have been in a strong and consistent uptrend for the last 6 weeks or so. As a result, a slew of key resistance levels have been blown through.

silver rallyResistance for gold was last seen at $1,191/oz, the metal’s high on October 15th, but prices cleared this hurdle early on Monday. $1,200/oz is an intuitive resistance level to keep an eye on, while support exists at $1,183/oz and then $1,170/oz.

Meanwhile, silver’s technical outlook is also finally in the hands of the bulls. After breaking $15/oz, silver’s next resistance lies at $15.50/oz.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.