NEW YORK, Jan 29: Prices of precious metals gold and silver were rallying in early US trading, erasing modest overnight losses on Friday, report agencies.
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 US 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.
In other news, the World Gold Council has reported that 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" on the day saw the US dollar index lower.
US 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.
Meanwhile, the Covid-19 pandemic continued to ravage many countries, including the US and UK. If the US 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 US 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.
A broker said in a morning email dispatch: "Ironically, the GameStop saga may have marked the top of the US 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 US 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 is partly due to traders/investors or even fund managers viewing that market as a cheaper way to play the keener risk aversion.
