Gold Price Backs Off as U.S. Dollar Index in Strong Rebound
New York (May 19) Gold prices are moderately lower in early U.S. trading Tuesday, on a corrective pullback and some chart consolidation from recent good gains that pushed prices to a three-month high Monday. A resurgent U.S. dollar index this week is also a bearish outside market force working against the gold and silver bulls. June Comex gold was last down $9.20 at $1,218.30 an ounce. July Comex silver was last down $0.307 at $17.425 an ounce.
The greenback was boosted Tuesday, while the Euro currency sold off, following remarks from two European Central Bank finance officials who said the ECB could add even more monetary stimulus to the European Union economy in order to meet inflation targets. One official said the ECB may front load bond purchases heading into the quieter summer time period for financial markets activity in Europe. The timing of the two officials’ remarks suggests the ECB could be unhappy with the recent strong bounce in the Euro currency. European stock and bond markets rallied in the wake of the comments from the EU officials, which means there will continue to be more Euros printed, for which to then buy more EU stocks and bonds.
The easy ECB monetary policy and ensuing weak Euro currency of recent months are credited with upbeat EU economic reports Tuesday, as the Euro Zone saw an 11% increase in exports in April, while imports were up 7%. Meantime, consumer prices were unchanged in April, from the same time last year. The unchanged consumer price reading in April was the first time in four months the figure was not negative.
EU economic leader Germany did get some downbeat economic news Tuesday when the ZEW economic sentiment index fell for the second straight month, to 41.9 in May from 53.3 in April. A reading of 48.2 was expected in the May report.
In the U.K., the consumer price index fell 0.1% in April, year-on-year, for the first decline in the index in over 50 years.
China equities rose Tuesday on news that Chinese government approved some big railroad projects for the country as well as eased some of its requirements on capital markets. Chinese monetary officials are trying to prod the world’s second-largest economy into more growth.
Traders are looking ahead to Wednesday afternoon’s release of the minutes of the latest FOMC meeting. The report will be very closely examined by traders and investors for clues on the timing of any upcoming rate hike from the Federal Reserve.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and new residential construction.
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Wyckoff’s Daily Risk Rating: 5.0 (Trader and investor market risk aversion at present is not keen.)
(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.
The London A.M. gold fix is $1,219.65 versus the previous P.M. fix of $1,223.50.
Technically, June gold futures bears still have the slight overall near-term technical advantage. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,250.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00. First resistance is seen at the overnight high of $1,225.50 and then at Monday’s high of $1,232.00. First support is seen at the overnight low of $1,216.80 and then at $1,210.00. Wyckoff’s Market Rating: 4.0
July silver futures are seeing a corrective pullback after hitting a nearly four-month high Monday. Silver bulls have the slight near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.00. First resistance is seen at Monday’s high of $17.775 and then at $18.00. Next support is seen at the overnight low of $17.315 and then at $17.20. Wyckoff's Market Rating: 5.5.
Source: KitrcoNews
