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Gold Hits 3-Week High, Pushes Above $1,100, on Short Covering, Bargain Hunting, Bullish Outside Markets

(Kitco News) - Gold prices ended the U.S. day session moderately higher, moved above the psychological resistance barrier of $1,100.00 and hit a three-week high Monday. Short covering in the futures markets and bargain hunting in the spot market were featured. Buy stop orders were also triggered as prices pushed above the technically important $1,100 level.  The yellow metal had been trading sideways at lower levels for the past three weeks, after hitting a 5.5-year low in mid-July. This suggests the sellers have become exhausted. Monday’s price gains did slightly improve the technical postures for both gold and silver markets. However, the gold and silver market bulls still have some very heavy lifting to do in the near term to suggest price uptrends can be sustained. December Comex gold was last up $10.50 at $1,104.60 an ounce. September Comex silver was last up $0.469 at $15.29 an ounce.

The two key “outside markets early Monday saw the Nymex crude oil market hit a new four-month low below $44.00 a barrel. Crude oil is leading a major prices slump in the raw commodity sector that has worsened over the summer and is leading to fresh worries about the dreaded price deflation gripping world economies. However, crude oil recovered in late-morning trading and the U.S. dollar index moved from lower levels to higher levels, which further encouraged the raw commodity market bulls, including gold and silver bulls, on this day.

In overnight news, there was another downbeat economic report coming out of the world’s second-largest economy. China’s exports in July were down 8.3%, year-on-year, while imports were down 8.1% in the same period. Also, China’s consumer price index was up 1.6% in July from last year, but producer prices were down 5.4% in the same period. This news helped to pressure European stock markets Monday. However, China’s own stock market rallied on ideas the Chinese government will continue to prop up its equities market. Monday’s economic data from China did lead to ideas China will have to implement further monetary policy and economic stimulus measures in the coming weeks and months, which many raw commodity traders deemed bullish—despite the fact today’s report, itself, was bearish.

The Federal Reserve’s number-two official Stanley Fischer said in a Bloomberg TV interview Monday morning that the U.S. economy is nearing full employment and although inflation is presently low, that’s just temporary due to falling commodity prices. He said the Fed should still be vigilant on inflation. He said the Fed has been extremely expansionary in its monetary policy. These remarks were initially read as falling into the camp of the U.S. monetary policy hawks. However, other market watchers said Fischer’s overall tone of his comments could actually be read as neutral.

The London P.M. gold fix is $1,097.00 versus the previous A.M. fix of $1,094.80.

Technically, December gold futures prices closed nearer the session high today. Gold bears still have the firm overall near-term technical advantage, even though prices have been trading sideways for three weeks after hitting a 5.5-year low in late July. This protracted sideways movement on the daily chart is now favoring the bulls, as it suggests the bears have become exhausted. An 11-week-old downtrend on the daily bar chart was also negated today. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,133.80. Bears' next near-term downside price breakout objective is closing prices below solid technical support at the July low of $1,073.70. First resistance is seen at today’s high of $1,108.50 and then at $1,110.00. First support is seen at $1,100.00 and then at today’s low of $1,089.00. Wyckoff’s Market Rating: 2.0

September silver futures prices closed nearer the session high today and hit a four-week high on short covering and bargain hunting. Silver bears still have the overall near-term technical advantage. However, an 11-week-old downtrend on the daily bar chart was negated today, to suggest a market bottom is in place. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the July high of $15.90 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the July low of $14.33. First resistance is seen at today’s high of $15.375 and then at $15.50. Next support is seen at $15.00 and then at today’s low of $14.705. Wyckoff's Market Rating: 2.5.

September N.Y. copper closed up 670 points at 239.95 cents today. Prices closed nearer the session high after hitting a contract and six-year low early on. Prices today also scored a significantly bullish “key reversal” up on the daily bar chart, which is one early clue that a market bottom is in place. Copper bears do still have the overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 250.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 225.00 cents. First resistance is seen at today’s high of 241.10 cents and then at 245.00 cents. First support is seen at 237.50 cents and then at 235.00 cents. Wyckoff's Market Rating: 2.0.

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

 

 

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