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Gold Bounces on Short Covering, Bargain Hunting, Some Safe-Haven Buying

(Kitco News) - Gold ended the U.S. day session moderately higher Wednesday, on short covering in the futures market and bargain hunting in the cash, following recent selling pressure that saw prices hit a 3.5-month low overnight. There may have even been a touch of safe-haven demand for the yellow metal. August Comex gold was last up $9.60 at $1,162.30 an ounce. September Comex silver was last up $0.186 at $15.15 an ounce.

There is moderate risk aversion in the world market place at mid-week. U.S. Treasuries prices were firmer Wednesday, but the U.S. dollar index saw a corrective pullback from recent gains. Now the focus of unsettled traders and investors is also on China.

China’s stock market dropped again Wednesday and is down over 30% in three weeks’ time. The Chinese government is frantically trying to stem the tide of selling pressure via various controlling measures, but is not having much success. On Wednesday Chinese officials called their stock market sell-off “irrational.” It appears the Chinese government is getting a lesson in free market capitalism, as even its heavy-handed approach to market intervention can’t stop the selling pressure in China equities.

It is likely upcoming economic and financial developments in China will have more worldwide markets significance than will developments in Greece. Copper and crude oil prices have plunged this week, partly on China economic worries. China is the world’s largest raw commodity importer. China’s economic worries have already spilled over into Australia and Japan, as the Australian dollar has plunged to a six-year low versus the U.S. dollar this week and Japan’s stock market is feeling selling pressure. If China markets continue to seriously melt down, then the fears arise of a worldwide financial and stock market contagion. That’s a real scary scenario and could be prompting some safe-haven demand for gold.

Meantime, negotiations between Greece and the EU/IMF are continuing this week with still no deal reached. Now there is yet another deadline for a deal to occur—Greece must come up with a credible plan by Sunday, says the EU. The Wall Street Journal reports Greece wants a three-year bailout deal and said in return it will implement new austerity measures. The Germans are reportedly still taking a hard line with Greece. European stock markets were firmer and the Euro currency was also up Wednesday as European investors are numb to the daily machinations of the Greece debt crisis.

Traders and investors were awaiting Wednesday afternoon’s FOMC minutes release, from the June 16-17 meeting. As always, the market place wants to see if the minutes provide any fresh insight to just when the Federal Reserve will raise U.S. interest rates for the first time in years.

The London P.M. gold fix is $1,15.50 versus the previous A.M. fix of $1,154.25.

Technically, August gold futures prices closed nearer the session high. Prices overnight hit a 3.5-month low. Gold bears still have the solid overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,174.40. Bears' next near-term downside price breakout objective is closing prices below solid technical support at the March low of $1,143.80. First resistance is seen at today’s high of $1,163.70 and then at Tuesday’s high of $1,170.00. First support is seen at last week’s low of $1,155.80 and then at $1,150.00. Wyckoff’s Market Rating: 1.5

September silver futures prices closed nearer the session high on short covering and bargain hunting after hitting a seven-month low Tuesday. Silver bears have the solid overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $15.82 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.00. First resistance is seen at today’s high of $15.22 and then at $15.435. Next support is seen at this week’s low of $14.62 and then at $14.50. Wyckoff's Market Rating: 1.5.

September N.Y. copper closed up 475 points at 249.35 cents today. Prices closed nearer the session high on short covering after hitting another contract low early on today. The China stock market sell-off this week has hit the copper market. Copper bears still have the solid near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 260.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 235.00 cents. First resistance is seen at today’s high of 252.15 cents and then at Tuesday’s high of 254.55 cents. First support is seen at 245.00 cents and then at 240.00 cents. Wyckoff's Market Rating: 1.5.

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

 

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