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P.M. Kitco Metals Roundup: Gold Ends Up on More Short Covering, Inflation Uptick in China

Tuesday July 9, 2013 2:26 PM

(Kitco News) - Gold prices ended the U.S. day session moderately higher Tuesday, supported in part on inflation news out of China, more short covering and some technical follow-through buying strength from Monday’s gains. A stronger U.S. dollar index did limit the upside in both gold and silver markets Tuesday. August gold was last up $6.70 at $1,241.60 an ounce. Spot gold was last quoted up $6.10 at $1,243.75. September Comex silver last traded up $0.082 at $19.12 an ounce.

Gold prices were boosted Tuesday on news that China’s inflation rate heated up a bit in June. China’s June consumer price index was up 2.7% on an annualized basis, compared to a 2.1% rate in May and above the consensus forecast for a 2.5% rise. Gold and other hard assets have traditionally been used as a hedge against inflationary price pressures. The China inflation news coincides with the recent surprisingly sharp rise in U.S. bond yields and home mortgage rates. While still not perceived by the world market place to be problematic, inflation is a phenomenon that creeps up and is not recognized as a serious problem until it already has a strong grip around the throats of major economies. Many market watchers have never been convinced that the past few years of the major central banks of the world printing money that such would not come back to produce a strong inflationary bite.

The civil unrest in Egypt is still a front-burner issue for the world market place. There were no major developments Tuesday, but the situation still has traders uneasy. The crisis in Egypt could quickly escalate and even spread to other countries in the Middle East. Gold has seen some safe-haven investor demand due to the recent political upset and violence in Egypt.

The market place is awaiting the Wednesday release of China’s latest trade report and the minutes of the last U.S. Federal Reserve FOMC meeting. These two data points are the most important economic readings of the week.

The U.S. dollar index was sharply higher Tuesday and hit a fresh three-year high. The overall strong technical posture of the dollar index remains a major bearish underlying factor for the metals. Nymex crude oil prices were slightly higher Tuesday afternoon. Prices hit a 14-month high Monday. With Nymex crude trading above $100 a barrel, that is a bullish underlying factor for the raw commodity sector, including the precious metals.

The London P.M. gold fix is $1,255.50 versus the previous London P.M. fixing of $1,235.25.

Technically, August gold futures prices closed near mid-range Tuesday. The gold bears still have the solid overall near-term technical advantage, however. Gold prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,267.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the June low of $1,179.40. First resistance is seen at Tuesday’s high of $1,258.70 and then at $1,267.00. First support is seen at Tuesday’s low of $1,232.00 and then at Monday’s low of $1,214.40. Wyckoff’s Market Rating: 2.0

September silver futures prices closed near mid-range and saw tepid short covering in a bear market. Silver bears still have the solid overall near-term chart advantage. Prices are in an eight-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $20.075 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the June low of $18.17. First resistance is seen at Tuesday’s high of $19.485 and then at $19.83. Next support is seen at Tuesday’s low of $19.93 and then at Monday’s low of $18.67. Wyckoff's Market Rating: 1.5.

September N.Y. copper closed down 335 points at 306.60 cents Tuesday. Prices closed near mid-range. The stronger U.S. dollar was bearish for copper Tuesday. Copper bears have the solid overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at last week’s high of 317.90 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the contract low of 298.55 cents. First resistance is seen at 310.00 cents and then at Tuesday’s high of 311.60 cents. First support is seen at Tuesday’s low of 302.50 cents and then at 300.00 cents. Wyckoff's Market Rating: 1.5.

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By Jim Wyckoff, contributing to Kitco News; jwyckoff@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 precious metal products, 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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