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A.M. Kitco Metals Roundup: Gold Sharply Up, At 4-Wk High, On Short Covering And Technical Buying

Monday July 22, 2013 8:36 AM

(Kitco News) - The gold market is solidly higher and hit a four-week high in early U.S. trading Monday, boosted by heavy short covering and new technical buying as buy stops were hit that pushed prices well above what was stiff chart resistance at the $1,300.00 level. August gold was last up $27.00 at $1,319.90 an ounce. Spot gold was last quoted up $24.80 at $1,322.00. September Comex silver last traded up $0.70 at $20.14 an ounce.

It’s a “risk-on” trading day in the market place early Monday, as the U.S. dollar index is under selling pressure while crude oil and gold prices are posting gains. 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.

The commodity markets are also seeing 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.

European stocks were mostly weaker in subdued summertime trading Monday, while Asian stock markets were mostly firmer.

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

U.S. economic data due for release Monday includes the Chicago Fed national activity index and existing home sales.

The London A.M. gold fix is $1,313.75 versus the previous London P.M. fixing of $1,295.75.

Technically, the August Comex gold market bulls are making progress. Prices are in a fledgling three-week-old uptrend on the daily bar chart. The gold bulls’ next upside near-term price objective is to produce a close above technical resistance at $1,350.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at last week’s low of $1,269.30. First resistance is seen at the overnight high of $1,325.00 and then at the May low of $1,338.00. First support is seen at $1,310.00 and then at $1,300.00.

Silver bulls have also gained some upside momentum to start the trading week. Prices hit a four-week high overnight and are also in a three-week-old uptrend on the daily bar chart. September Comex silver 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 the overnight high of $20.50 and then at $20.75. Next support is seen at $20.00 and then at the overnight low of $19.495.

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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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