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Gold Prices Power To 9-Week High Amid Risk Aversion

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(Kitco News) - Gold prices are posting double-digit gains and hit a nine-week high in early-morning U.S. trading Monday. Safe-haven demand remains in play to start the trading week and the month, as global stock markets are selling off. August gold futures were last up $11.60 an ounce at $1,322.70. July Comex silver prices were last up $0.128 at $14.695 an ounce.

European and Asian stock markets were down overnight. U.S. stock indexes are also pointed toward lower openings when the New York day session begins and hit three-month lows overnight.

Risk aversion is keener to start the trading week and the month. The ongoing U.S. trade war with China and new worries about a U.S. trade dispute with Mexico have traders and investors jittery. In fact, some analysts are now saying the Federal Reserve will have to lower U.S. interest rates this year to offset a slowing pace of economic growth caused by the trade disputes.

Government bond yields in the U.S., Germany and other countries are on the decline as investors seek out safe-haven assets and shed riskier assets like equities.

The European banking sector has been hit especially hard by falling government bond yields that equate to lower interest rates, which in turn hurt banks’ profits. The eight largest banks in the European Union now have a smaller combined market value than JP Morgan, despite the European banks having three times as many assets.

The Euro zone got more downbeat economic news today when the May manufacturing purchasing managers index (PMI) came in at 47.7 versus the forecast for 47.9. Any reading below 50.0 suggests contraction in the sector.

The key “outside markets” today see the U.S. dollar index trading modestly down. Meantime, Nymex crude oil prices are higher and trading around $54.00 a barrel after dropping to a nearly five-month low in overnight trading.  

U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers’ index (PMI), the ISM manufacturing report on business, construction spending, the global manufacturing PMI, and domestic auto industry sales.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls have gained the overall near-term technical advantage and have momentum now. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $1,335.70. Bears' next near-term downside price breakout objective is pushing August futures prices below solid technical support at $1,300.00. First resistance is seen at $1,325.00 and then at $1,330.00. First support is seen at the overnight low of $1,310.90 and then at $1,305.00. Wyckoff's Market Rating: 6.5

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures bears still have the overall near-term technical advantage. Prices are still in a three-month-old downtrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $15.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the November low of $14.175. First resistance is seen at $14.75 and then at $14.865. Next support is seen at $14.50 and then at $14.35. Wyckoff's Market Rating: 2.5.

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