Gold At 3.5-Mo. High As Global Bond Market Rout Spooks Marketplace

(Kitco News) - Gold prices are solidly higher and hit a 3.5-month high in early U.S. trading Wednesday.Safe-haven demand is in play for the gold and silver markets at mid-week, amida sharp sell-off in world government bond markets. A lower U.S. dollar index onthis day is also providing a boost to the precious metals. February Comex gold was last down $9.30 an ounce at $1,323.10. March Comex silver was last up $0.12at $17.135 an ounce.

Thefeature in the marketplace Wednesday is rising world government bond yields.This has helped to pressure global stock markets, while boosting safe-havengold and silver prices. World stock markets were mostly lower overnight. U.S.stock indexes are pointed toward lower openings when the New York day sessionbegins. U.S. stock indexes hit record highs on Tuesday and some profit-takingpressure is not unexpected.

Bloombergnews reportedly published a story about the Chinese government possiblyre-evaluating its massive holdings of U.S. Treasury securities.

Therehave been recent prognostications from noted financial market analysts that thelong-term bull market runs in U.S. Treasuries are over. Longer-term technicaldamage has been inflicted on T-Bond and T-Note charts. This suggests risinginterest rates and rising inflation. While the tighter monetary policies thatgenerally come with rising inflation have been bearish for the commoditymarkets, per recent history, longer-term history actually shows that hardassets benefit from rising inflation. Times of problematic inflation see theinvesting public generally opt for hard assets over paper assets. The next shoeto drop in this scenario of rising inflation will be a major top being put inthe U.S. stock market.

Anauction of German government bonds Wednesday saw the highest yields fetchedsince last July, amid weak investor demand.

Thekey outside markets on Wednesday morning see the U.S. dollar index lower on apullback from this week's gains. Thegreenback bears have the overall near-term technical advantage.

Meantime,Nymex crude oil prices are higher and hit another three-year high of $63.57 abarrel overnight. Traders are waiting to see if the U.S. implements neweconomic sanctions against Iran, which could limit their oil exports. Therecent rally in oil prices has been a positive development for the rawcommodity sector, including the precious metals.

U.S.economic data due for release Wednesday includes the weekly MBA mortgageapplications survey, import and export prices, the monthly wholesale tradereport, and the weekly DOE liquid energy stocks report.

Technically,Februarygold futures bulls have the overall near-term technical advantage.Prices are in a four-week-old uptrend on the daily bar chart. Bulls' nextupside technical objective is pushing and closing prices above chart resistanceat $1,350.00. Bears' next near-term downside price breakout objective isclosing prices below solid technical support at $1,300.00. First support isseen at $1,312.70 and then at $1,307.10. First resistance is seen at today'shigh of $1,328.60 and then at $1,335.00. Wyckoff's Market Rating: 6.0

March silver bulls have the overall near-term technical advantage. Prices are stillin a four-week-old uptrend on the daily bar chart. The next upside price breakoutobjective is closing futures prices above solid technical resistance at theOctober high of $17.59 an ounce. The next downside price breakout objective forthe bears is closing prices below solid support at the October low of $16.435. Firstresistance is seen at last week's high of $17.32 and then at $17.50. Nextsupport is seen at today's low of $16.93 and then at $16.75. Wyckoff's MarketRating: 6.0.

By Jim Wyckoff

For Kitco News

Follow @jimwyckoffjwyckoff@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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