(Kitco News) - Gold prices are higher in early U.S. trading Friday, on a corrective bounce from strong losses Thursday. Silver prices are weaker early today. August gold was last up $20.50 at $2,373.70. September silver was down $0.06 at $27.90.
The just-released U.S. personal income and outlays report for June, including its inflation indicators, saw the personal consumption expenditures (PCE) price index up 2.5%, year-on-year versus up 2.6% in the May report. The core PCE index (excluding food and energy) was up 2.6%, which is unchanged from the May report. The marketplace is initially reading the inflation numbers as tame. These PCE inflation numbers are closely watched by the Federal Reserve.
Asian and European stock indexes were mixed overnight. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins, on a rebound after seeing a big sell off that pushed the S&P and Nasdaq stock indexes to six-week lows this week. A Barron’s headline today reads: “Tech stocks rotation shows market confusion; why it may be time to bail.”
The U.S. stock indexes, gold, silver and crude oil prices have all absorbed solid losses recently. Part of the selling pressure on these markets is likely attributed to the big institutional traders having to unwind their “carry” trades, whereby they had sold short the Japanese yen and purchased other currencies like the U.S. dollar in a spread trade due to significant interest rate differentials in the U.S. and other countries, and Japan. However, the recent Bank of Japan intervention to support the yen, as well as the BOJ hinting at implementing a tighter monetary policy have boosted the yen against the dollar and other currencies, and thereby prompting the carry spread trades to be unwound. With the big institutional traders and the big money flows created in their trades, the aforementioned stock and commodity markets were likely sold by the institutions as part of the unwinding of the carry trades. The initial price downdrafts probably led to even more selling pressure by other smaller hedge funds and retail traders, further pressuring those markets. There’s an old market saying that during hectic markets and trading action, if you can’t sell what you want, you sell what you can.
The key outside markets today see the U.S. dollar index near steady. Nymex crude oil prices are lower and trading around $78.00 a barrel. The benchmark 10-year U.S. Treasury note yield is presently 4.22%.
Other U.S. economic reports out Friday include the University of Michigan consumer sentiment survey.
Technically, August gold bulls still have the overall near-term technical advantage but are fading. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,488.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,300.00. First resistance is seen at $2,385.00 and then at $2,400.00. First support is seen at the overnight low of $2,362.00 and then at $2,350.00. Wyckoff's Market Rating: 6.5.
September silver futures bears have gained the overall near-term technical advantage. Prices are now trending down on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at this week’s high of $29.63. The next downside price objective for the bears is closing prices below solid support at the May low of $26.55. First resistance is seen at $28.00 and then at $28.50. Next support is seen at $27.50 and then at $27.00. Wyckoff's Market Rating: 4.0.
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