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Gold Prices Rally On Short Covering, Weaker U.S. Dollar, Stocks

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(Kitco News) - Gold prices are posting good gains in mid-morning U.S. trading Friday, on short covering and perceived bargain hunting heading into the weekend. Gold did see a brief, mild sell off following a better-than-expected reading on the U.S. economy, but prices quickly recovered. June gold futures were last up $8.60 an ounce at $1,288.10. May Comex silver was last up $0.106 at $14.98 an ounce.

The U.S. economic highlight of the week saw the first estimate on first-quarter gross domestic product come in at up 3.2%, year-on-year, which is a solid miss to the upside. U.S. GDP was expected to come in at up 2.5%. The report falls into the camp of the U.S. monetary policy hawks, who would like to see U.S. interest rates rise sooner.

The U.S. dollar index sold off in the wake of the strong U.S. GDP number, which is surprising to many. However, the USDX on Thursday pushed to a two-year high and today’s price action is just a normal downside correction, especially heading into the weekend as those traders who had been long the dollar are taking some profits.

The weaker greenback and a bit of selling pressure in the U.S. stock market are also working in favor of the precious metals market bulls.

Asian and European stock indexes were mostly lower overnight. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins.

There continues to be little activity on the geopolitical front to influence world markets, making for a generally calmer and quieter trading environment.

The other key “outside market” today sees Nymex crude oil prices lower on profit taking after hitting a six-month high earlier this week, and are trading around $65.25 a barrel.

Other U.S. economic data due for release Friday includes the University of Michigan consumer sentiment index.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bears have the overall near-term technical advantage. A two-month-old downtrend line is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $1,300.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,250.00. First resistance is seen at today’s high of $1,286.00 and then at $1,290.00. First support is seen at today’s low of $1,276.00 and then at $1,270.00. Wyckoff's Market Rating: 4.0

Live 24 hours silver chart [ Kitco Inc. ]

May silver futures bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at the April high of $15.31 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.50. First resistance is seen at this week’s high of $15.04 and then at $15.25. Next support is seen at today’s low of $14.845 and then at this week’s low of $14.70. Wyckoff's Market Rating: 3.5.

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