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Follow-through price gains in gold, silver give bulls momentum

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(Kitco News) - Gold and silver prices are higher in early U.S. trading Tuesday, with gold scoring a three-week high and silver a three-month high. Bulls are showing important follow-through buying strength Tuesday, after Monday’s solid gains, to suggest more upside for both metals in the near term. December gold was last up $11.60 at $1,713.70 and December silver was up $0.206 at $20.79.

Trading so far this week sees a weaker U.S. dollar, higher crude oil prices, falling U.S. Treasury yields and safe-haven demand--all fueling the runup in the two precious metals’ prices.

Global stock markets were mostly firmer overnight. Markets in China and Hong Kong were closed for a holiday Tuesday. U.S. stock indexes are pointed to solidly higher openings when the New York day session begins, on follow-through strength from the solid gains posted Monday. Risk appetite has at least temporarily up-ticked early this week, after weaker purchasing managers indexes (PMIs) from major economies, including the U.S., on Monday led to notions (probably premature) that the major central banks will start to decelerate their monetary policy tightening paces. Australia’s central bank on Tuesday raised its main interest rate by only 0.25%, following its last hike of 0.5%.

In a reminder of the global inflation problem, the Euro zone today reported its producer price index in August was up 43.3%, year-on-year, mainly due to soaring energy costs. However, excluding energy, the zone’s August PPI was still up 14.5% from last year.

The key outside markets today see the U.S. dollar index solidly lower on follow-through pressure from Monday’s losses. Nymex crude oil prices are higher and trading around $84.70 a barrel. Traders are awaiting an OPEC meeting on Wednesday that is expected to see the cartel cut its collective oil production by at least 1 million barrels a day, reports said. Meantime, the yield on the 10-year U.S. Treasury note is falling and presently fetching 3.586%. Last week the yield on the 10-year pushed very close to 4.0%.  

With so many gold and silver bears, it doesn't take much to trigger a short squeeze

The most important U.S. data point of the week, if not the month, is Friday’s employment situation report for September from the Labor Department. The key non-farm jobs number is expected to come in at up 275,000. The August report showed a non-farm jobs rise of 315,000.

U.S. economic data due for release Tuesday includes the Johnson Redbook and chain store weekly indexes, and manufacturers’ shipments and inventories.

Live 24 hours gold chart [Kitco Inc.]

Technically, the December gold futures bears have the firm overall near-term technical advantage but the bulls have gained some momentum to begin to suggest a market bottom is in place. A downtrend on the daily bar chart is now in jeopardy. Bulls’ next upside price objective is to produce a close above solid resistance at $1,780.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the September low of $1,622.20. First resistance is seen at $1,725.00 and then at $1,746.40. First support is seen at the overnight low of $1,704.00 and then at $1,700.00. Wyckoff's Market Rating: 3.0

Live 24 hours silver chart [ Kitco Inc. ]

September silver futures bulls have the slight overall near-term technical advantage and have momentum. Silver bulls' next upside price objective is closing prices above solid technical resistance at $22.00. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at the overnight high of $21.115 and then at $21.50. Next support is seen at $19.60 and then at $19.00. Wyckoff's Market Rating: 5.5.

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.