Downbeat China data puts price pressure on gold, silver

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(Kitco News) - Gold and silver prices are solidly lower in early U.S. trading Tuesday, following some weaker-than-expected economic data out of China that has cast a pall over much of the raw commodity sector today. December gold was last down $21.00 at $1,967.60. December silver was last down $0.609 at $22.625.

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The latest economic data out of the world’s second-largest economy saw China’s October exports fall 6.4%, year-on-year, which was lower than expected. China’s imports rose a less-than-expected 3.0%, year-on-year. China is a massive consumer of raw commodities and when its economy is listing it dampens bullish enthusiasm across the raw commodity market spectrum—on weakening demand concerns.

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

In other overnight news, Australia’s central bank raised its main interest rate by 0.25% to 4.35%, saying inflation is still too high. The central bank had gone four monetary policy meetings in a row with a pause. Barrons reported today the Reserve Bank of Australia’s surprise rate hike to crack down on inflation may be a precursor to what the U.S. central bank may have to do in the coming months. The Wall Street Journal reported overnight that Minneapolis Fed official Neel Kashkari said he is not convinced U.S. interest rate hikes are done and said he would rather err on side of overtightening. This news also falls into the camp of the metals market bears.

The Euro zone producer price index for September came in at up 0.5% from August but down 12.4%, year-on-year.

The key outside markets also lean bearish for the metals markets today. The U.S. dollar index is higher. Nymex crude oil prices are lower and trading around $79.50 a barrel. The yield on the benchmark U.S. Treasury 10-year note is presently fetching 4.614%.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook retail sales report, the international trade report, the IDB/TIPP economic optimism index and consumer credit.

Technically, the gold futures bulls have the near-term technical advantage. Prices are trending higher on the daily bar chart, but the bulls need to show fresh power soon to keep the uptrend alive. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at the October high of $2,019.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at the overnight high of $1,985.20 and then at $2,000.00. First support is seen at $1,964.60 and then at $1,950.00. Wyckoff's Market Rating: 6.0.

The silver bulls have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at the October high of $23.88. The next downside price objective for the bears is closing prices below solid support at $21.50. First resistance is seen at $23.00 and then at the overnight high of $23.17. Next support is seen at $22.565 and then at $22.00. Wyckoff's Market Rating: 5.5.

By

Jim Wyckoff

For Kitco News

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jwyckoff@kitco.com

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