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P.M. Kitco Roundup: Gold Sharply Higher, Hits 4-Wk High, on Short Covering and Technical Buying amid Weaker U.S. Dollar Index

Monday July 22, 2013 2:35 PM

(Kitco News) - The gold market ended the U.S. day session sharply higher and hit a four-week high Monday. The yellow metal was boosted by heavy short covering and new technical buying as buy stops were hit when pushed prices well above what was stiff chart resistance at the $1,300.00 level. The weakening state of the U.S. dollar index has also been bullish for the precious metals just recently. August gold was last up $40.20 at $1,333.00 an ounce. Spot gold was last quoted up $37.40 at $1,334.50. September Comex silver last traded up $0.98 at $20.44 an ounce.

The U.S. dollar index was sharply lower and hit a four-week low Monday as the greenback bears have gained downside momentum to suggest the index has put in a market top. Meantime, Nymex crude oil futures prices hovering near a 14-month high. WTI crude futures are closing in on $110.00 a barrel. WTI crude oil prices on Monday briefly pushed above the price of its rival Brent crude for the first time in a long while. These two key “outside markets” have been in a bullish posture (weaker dollar index, higher crude oil prices) for the precious metals markets recently.

Judging from recent price action in many markets, including the precious metals, it appears Federal Reserve Chairman Ben Bernanke has made some progress in convincing the market place that U.S. monetary policy will remain very accommodative for some time to come. However, the inflation hawks can put forth a good argument that the rising U.S. bond yields and U.S. home mortgage rates do suggest inflationary pressures are on the creep higher.

The commodity markets also saw some buying support coming from last Friday’s move by China’s central bank to lower the interest rate floor on China’s banks’ lending rates. Just a few weeks ago a liquidity crunch in China’s banking system spooked the world market place.

The London P.M. gold fix is $1,327.00 versus the previous London P.M. fixing of $1,295.75.

Technically, August gold futures prices closed nearer the session high Monday and hit a fresh four-week high. The bulls today gained good upside near-term technical momentum to suggest a market bottom is in place. Prices also negated a 9.5-month-old downtrend on the daily bar chart. A three-week-old price uptrend is now in place on the daily chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,350.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at Monday’s high of $1,339.10 and then at $1,350.00. First support is seen at $1,323.00 and then at $1,310.00. Wyckoff’s Market Rating: 4.0

September silver futures prices closed nearer the session Monday and hit a fresh four-week high. Price action Monday also negated a 9.5-month-old downtrend on the daily bar chart. Prices are now in a three-week-old uptrend on the daily chart. Bulls Monday gained good upside near-term technical momentum to suggest that a market bottom is in place. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $21.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $19.215. First resistance is seen at Monday’s high of $20.575 and then at $20.75. Next support is seen at $20.00 and then at $19.75. Wyckoff's Market Rating: 3.5.

September N.Y. copper closed up 410 points at 318.10 cents Monday. Prices closed near mid-range but did hit a fresh four-week high. Solid losses in the U.S. dollar index helped the bulls today. Prices are in a four-week-old uptrend on the daily bar chart. Copper bears still have the overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 325.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 305.00 cents. First resistance is seen at 320.00 cents and then at today’s high of 321.50 cents. First support is seen at Monday’s low of 314.40 cents and then at last week’s low of 310.65 cents. Wyckoff's Market Rating: 3.5.

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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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