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Gold Prices Up; U.S. Rate Cut Expected

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(Kitco News) - Gold and silver prices are higher in early U.S. trading Tuesday. The precious metals bulls are expecting good news to come their way from the Federal Reserve this week. August gold futures were last up $7.50 an ounce at 1,427.90. September Comex silver prices were last up $0.045 at $16.485 an ounce.

The main economic event of the week begins on Tuesday morning when the Federal Reserve’s Open Market Committee (FOMC) meets to determine monetary policy. The Fed is expected to lower interest rates at the conclusion of the meeting Wednesday afternoon. The precious metals bulls will be sorely disappointed if the Fed does not make a U.S. rate cut. Most market watchers think a 0.25% interest rate reduction is in the cards, but the metals would likely get a bigger boost if the Fed did a less-likely 0.5% rate cut.

Then on Friday the U.S. employment situation report for July is out. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.

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

A feature in overnight trading was a further decline in the British pound, as the currency fell to a nearly 2.5-year low on worries about a “hard Brexit.” New Prime Minister Boris Johnson is seen as more hard-line on U.K. negotiations with the European Union.

The World Gold Council reported emerging central banks are purchasing gold at a faster pace this summer. Lower government bond yields are attracting more buying interest in the yellow metal.

Also in focus this week is U.S.-China trade talks that have resumed at a high level. U.S. Treasury Secretary Mnuchin and U.S. Trade Representative Lighthizer are in Shanghai for discussions that began today. Expectations are low key for any significant breakthroughs.

The key “outside markets” today see Nymex crude oil prices higher and trading around $57.50 a barrel. The U.S. dollar index is slightly up and today hit another new high for the year overnight.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, personal income and outlays, pending home sales, the consumer confidence index and the S&P Corelogic home price index.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls still have the solid overall near-term technical advantage. A two-month-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at the July high of $1,454.40. Bears' next near-term downside price breakout objective is pushing August futures prices below solid technical support at $1,400.00. First resistance is seen at last week’s high of $1,434.10 and then at $1,442.00. First support is seen at $1,420.00 and then at last week’s low of $1,411.10. Wyckoff's Market Rating: 7.0

Live 24 hours silver chart [ Kitco Inc. ]

September silver futures bulls have the solid overall near-term technical advantage. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.625. First resistance is seen at last week’s high of $16.685 and then at $16.75. Next support is seen at $16.345 and then at last week’s low of $16.195. Wyckoff's Market Rating: 7.5.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.