Steep falls in gold and silver prices amid China Covid worries

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(Kitco News) – Gold and silver prices were sharply lower in early U.S. trade Monday, with gold hitting a nearly four-week low and silver hitting a nine-week low. There are growing concerns about demand for commodities as Covid cases in China, the world’s second largest economy, are spreading rapidly across the country. June gold futures were last down $35.90 to $1,898.00 and May Comex silver futures were last down $0.729 to $23.53 an ounce.

Global equity markets were mostly lower overnight, led by the biggest drop in Chinese stocks in two years. US stock indices are poised for lower opens as the New York daily session gets underway. There are growing concerns about the economic toll of China’s strict zero-Covid policy as lockdowns spread to Beijing. The Chinese yuan fell to its lowest level against the US dollar since late 2020. The Covid flare-up that has shut down much of Shanghai appeared to be worsening over the weekend. China ordered mandatory testing in one district of Beijing and closed some areas of the capital with a population of more than 20 million. This situation is expected to further disrupt already strained global supply chains and likely fuel already problematic inflation even further.

The Russia-Ukraine war, which shows no signs of de-escalation, continues to weigh on traders’ and investors’ risk appetite.

Across the major outside markets, Nymex crude oil futures prices are sharply down today, trading around $97.75 a barrel. The US dollar index is higher, hitting a two-year high earlier today. The yield on the 10-year US Treasury currently stands at 2.833%.

US economic data to be released on Monday includes the Chicago Fed’s national activity index and the Texas Manufacturing Outlook Survey.

Technically, the June gold futures bulls have a slight short-term technical advantage overall, but are fading fast and will need renewed strength soon to hold. The bulls’ next upside target is to find a close above the solid resistance at $1,950.00 in April. Bears’ next short-term downside target is to push futures prices below solid technical support at the March low of $1,893.20. Initial resistance is seen at $1,915.00 and then $1,925.00. Initial support is seen at the March low of $1,893.20 and then $1,875.00. Wyckoff’s market rating: 5.5

May silver futures bears have gained the overall short-term technical advantage amid the recent sharp price drop. The silver bulls’ next upside target is a close above the solid technical resistance at $25.00 an ounce. The next downside target for the bears is a close below the solid support at $23.00. Initial resistance is seen at the overnight high of $24.00 and then the overnight high of $24.24. The next support is seen at today’s low of $23.42 and then $23.00. Wyckoff’s market rating: 4.0.

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