Gold Pushes Above $1,200 Following Downbeat U.S. Retail Sales

(Kitco News) - Gold prices are higher and hit a two-week high in early U.S. trading Wednesday, following a U.S. retail sales report that did not meet market expectations. June gold futures pushed above the important $1,200.00 level. Silver prices hit a six-week high above $17.00 an ounce. Short covering in the futures market and bargain hunting in the cash market are featured. Some slight safe-haven demand is also seen. June Comex gold was last up $12.10 at $1,204.50 an ounce. July Comex silver was last up $0.519 at $17.04 an ounce.

U.S. retail sales for April came in unchanged from March, when a 0.2% rise was expected. The retail sales report is one of the most important U.S. economic data points of the month. The U.S. dollar index slumped on the news and is hovering near a four-month low.

World bond markets have stabilized Wednesday, following the recent rout of many countries’ bonds. The recent world bond market sell-off in prices (rising yields) has spilled over into selling pressure in many major world stock markets. The world bond market jitters have also provided some increased demand for safe-haven gold.

In overnight news, Euro zone first-quarter GDP came in at up 0.4% from the fourth quarter of last year and up 1.6% year-on-year. European stock markets were buoyed on the upbeat economic news.

There was mixed but mostly downbeat economic data coming out of China Wednesday. Chinese industrial production rose 5.9% in April, which was up a bit from March but is still running at the slowest pace in several years. Fixed-asset investment was up 9.6% in April, from up 13.1% in March. Total financing in April was up 12.4%, which was the lowest pace on record. One upbeat piece of China economic data Wednesday saw housing sales increase for the first time since December of 2013.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, import and export prices, retail sales, manufacturing and trade inventories, and the weekly DOE liquid energy stocks report.

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Wyckoff’s Daily Risk Rating: 5.5 (Trader and investor market risk aversion at present is not keen.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,193.00 versus the previous P.M. fix of $1,191.50.

Technically, June gold futures market bears still have the overall near-term technical advantage but the bulls gained some momentum Wednesday. The gold bulls’ next upside near-term price objective is to produce a close above solid technical resistance at $1,214.90. Bears' next near-term downside price breakout objective is closing prices below solid technical support at the May low of $1,168.40. First resistance is seen at $1,210.00 and then at $1,214.90. First support is seen at the overnight low of $1,190.40 and then at $1,180.00. Wyckoff’s Market Rating: 3.5

July silver futures bears have the overall near-term technical advantage. However, the bulls gained upside momentum Wednesday as prices pushed to a five-week high and have seen a bullish upside “breakout” from the recent choppy trading range. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the March high of $17.395 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at this week’s low of $16.12. First resistance is seen at today’s high of $17.06 and then at $17.25. Next support is at $16.765 and then at the overnight low of $16.48. Wyckoff’s Market Rating: 4.0.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff