Gold, Silver Hit With Follow-Through Selling Pressure
(Kitco News) - Gold prices are modestly lower and dropped to another five-month low in early U.S. trading Tuesday. Both gold and silver are seeing follow-through selling pressure after strong losses posted Tuesday. June Comex gold futures were last down $3.30 an ounce at $1,286.80. July Comex silver was last down $0.044 at $16.225 an ounce.
The surging U.S. dollar is a major factor working against the precious metals market bulls over the past few weeks. The U.S. dollar index hit another five-month high overnight. It’s important to remember that trends in the currency markets tend to be stronger and longer-lasting than price trends in other markets.
The gold and silver bulls need a dose of geopolitical unrest to wrestle their metals away from the grip of the appreciating greenback. Their wish may be granted as it appears the U.S.-North Korea summit in June is unraveling, which is not surprising to many. North Korea has cancelled talks with South Korea and now says it will not completely disarm its nuclear arsenal. The U.S. has not formally responded. This development could flare up into a markets-moving geopolitical event in the near term.
In overnight news, the Euro zone consumer price index for April came in at up 0.3% from March and up 1.2%, year-on-year. Those numbers were in line with market expectations.
Japan’s first-quarter GDP showed a growth rate of -0.2%, which was below forecasts for no change in growth.
Attention of the marketplace this week is also on U.S. trade meetings with China in Washington, D.C. Also, a possible U.S. decision on the NAFTA trade agreement with Canada and Mexico could be announced late this week, but many are skeptical it will happen so soon.
Something else to keep an eye on: The Turkish currency, the lira, fell to a record low against the U.S. dollar overnight, which prompted the Turkish central bank to issue a warning about “unhealthy” developments in the markets. In years past, unstable secondary currency markets have produced a contagion effect in the major currencies. This is not the case now, but it still warrants monitoring. Any tensions in the currency markets would likely prompt safe-haven demand for gold and silver.
The other key “outside market” today finds Nymex crude oil prices weaker and near $71.00 a barrel, and not far below Tuesday’s 3.5-year high.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential construction, industrial production and capacity utilization, and the weekly DOE liquid energy stocks report.
Technically, June gold bears have the overall near-term technical advantage and have momentum. Gold bulls' next upside near-term price breakout objective is to produce a close above what is now solid technical resistance at $1,300.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at the December low of $1,247.20. First resistance is seen at the overnight high of $1,296.40 and then at $1,300.00. First support is seen at $1,280.00 and then at $1,275.00. Wyckoff's Market Rating: 3.5
July silver futures bears have the overall near-term technical advantage. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $16.865 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at today’s high of $16.345 and then at Tuesday’s high of $16.565. Next support is seen at the May low of $16.07 and then at $16.00. Wyckoff's Market Rating: 3.0.