Gold, silver see routine corrective pullbacks

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(Kitco News) - Gold and silver prices weaker in midday U.S. trading early Thursday, on normal downside corrections following recent gains. A rally in the U.S. dollar index, weaker crude oil prices and a rise in U.S. Treasury yields are all negative daily “outside” elements for the precious metals markets. August gold was last down $9.50 at $1,971.20 and September silver was down $0.342 at $25.05.

Asian and European stock markets were mixed in overnight trading. U.S. stock indexes are mixed at midday. The U.S. stock indexes this week have hit new highs for the year amid upbeat trader and investor attitudes. U.S. inflation is trending lower and the U.S. economy is not too hot and not too cold. The higher stock indexes are also a bearish element for the safe-haven  gold and silver markets.

Here is my mid-summer take on key markets:

--U.S. dollar depreciation: The U.S. dollar index this week hit a 15-month low. Veteran market watchers know that trends in the currency markets tend to be stronger and longer-lasting than price trends in other markets. Look for the USDX to continue to trend lower until at least early September. After the U.S. Labor Day holiday in early September, market participants will get back down to more serious business, what with summer vacations over and the kids back in school. Markets can become more volatile in September, so the price downtrend in the U.S. dollar index could accelerate, or reverse. Until then, the path of least resistance for the USDX will remain sideways to lower—barring an unexpected geopolitical event that would likely drive safe-haven demand into U.S. dollars.

--U.S. stock indexes trending up: The U.S. stock indexes have been trending higher since early May and this week hit new highs for the year. So much for the old stock market adage, “Sell in May and go away.” The uptrends in the stock indexes have been unassuming and with low volatility. Those are signs the uptrends can continue in the coming weeks—at least until early September. Veteran stock market traders know the months of September and October can be rocky ones for the equities market.

--Crude oil prices on the rise: Nymex crude oil futures prices in mid-July hit a 2.5-month high and are presently trending higher. That’s a bullish element for most of the raw commodity sector. Rising oil prices also suggest the general marketplace thinks the U.S./global economy will not slip into recession in the coming months. It appears Nymex crude will continue to trend up in the coming weeks. However, there is strong chart resistance at the $82.00 to $85.00 area that will likely cap gains.

--Gold and Silver bulls come to life:  The past couple weeks have seen the gold and silver markets negate their near-term price downtrends on the daily charts and begin price uptrends. The eroding U.S. dollar index, easing inflation fears and a rally in crude oil prices are bullish elements for the precious metals that should continue to support sideways-to-higher price action into the end of summer.

--Government bond yields have dipped: Notions of “light at the end of the tunnel” regarding hawkish major central banks and their interest rate hikes have stabilized government bond yields and even allowed some to decline a bit. This is due to inflationary pressures easing over the past several months. Look for the trajectory of inflation to continue to be down until at least September. That means likely declining government bond yields in the coming weeks, albeit probably just modest dips.

--Grain market bulls coming back to life: The grain market bulls are back in business this week amid weather forecasts for the U.S. Midwest that are turning hotter and drier as the calendar turns to August, and amid the end of the Russia-Ukraine grain-shipping deal this week. Russia attacked a major Ukraine grain terminal earlier this week to add keener uncertainty regarding any grain shipments coming out of the Black Sea region. Technicals are presently fully bullish for soybeans, turning more bullish for corn, and neutral to slightly bearish for wheat. However, if the corn and soybean markets continue to rally, wheat markets will very likely follow suit. The month of August is the most critical growing month of the U.S. soybean crop. So look for soybeans to be the leader of the grain markets in the coming weeks.

Technically, August gold futures prices scored a mildly bearish outside day down on the daily bar chart today after hitting a six-week high early on. Bulls have the overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,900.60. First resistance is seen at today’s high of $1,989.80 and then at $2,000.00. First support is seen at Tuesday’s low of $1,958.10 and then at $1,950.00. Wyckoff's Market Rating: 6.0.

September silver futures prices scored a bearish outside day down today after hitting a nine-week high early on. The silver bulls have the overall near-term technical advantage. A three-week-old price uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the April high of $26.645. The next downside price objective for the bears is closing prices below solid support at $23.00. First resistance is seen at today’s high of $25.475 and then at $25.85. Next support is seen at this week’s low of $24.815 and then at $24.31. Wyckoff's Market Rating: 6.5.

September N.Y. copper closed up 250 points at 383.90 cents today. Prices closed near mid-range today. The copper bulls and bears are on a level overall near-term technical playing field amid choppy trading. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the June high of 396.40 cents. The next downside price objective for the bears is closing prices below solid technical support at 368.30 cents. First resistance is seen at today’s high of 388.85 cents and then at 396.40 cents. First support is seen at this week’s low of 378.10 cents and then at 374.25 cents. Wyckoff's Market Rating: 5.0.