Gold and silver bulls step in to buy the dip on bargain hunting

New York (July 28)  Gold and silver prices are higher in midday U.S. trading Tuesday, after selling off overnight and in early U.S. trading on profit taking from the shorter-term futures traders. Bargain-hunting bulls once again stepped in to buy the dip in prices, amid strong price uptrends in place on the charts. Gold prices overnight and hit a record high of $1,974.70, basis nearby Comex futures. Silver prices hit a more-than-seven-year high of $26.275 overnight. August gold futures were last up $14.00 an ounce at $1,945.00. September Comex silver prices were last up $0.074 at $24.575 an ounce.

Bullish fundamental drivers of the rallies in the precious metals remain in place and include a continued rise in Covid-19 infections in major industrialized countries and new shutdowns, a pending U.S. government stimulus package totaling $1 trillion, a depreciating U.S. dollar index that hit a nearly two-year low this week, rising U.S.-China political tensions, and a surge in buying of gold-back exchange traded funds.

Global stock markets were mixed in overnight trading, with European indexes mostly weaker and Asian indexes mostly firmer. The U.S. stock indexes are weaker at midday. One market analyst summed up the recent stock market strength in the face of rising Covid-19 infections and a “second wave” by saying markets seem to be pricing in a return to normalcy by the end of the year, largely on hopes of a proven vaccine by then. Those market participants “taking the other side of that trade” wonder when markets will start pricing in a worsening pandemic situation and no successful vaccine on the horizon. Some argue gold and silver markets are now pricing in the latter notion.

The Federal Reserve’s Open Market Committee (FOMC) will meet Tuesday and Wednesday to discuss U.S. monetary policy. No changes in policy are expected but the Fed is expected to reiterate U.S. interest rates will remain low for a long time amid the challenges of dealing with the pandemic.

The important outside markets today see Nymex crude oil prices weaker and trading around $41.20 a barrel. The U.S. dollar index is slightly firmer on a tepid corrective bounce after hitting a nearly two-year low Monday. The yield on the benchmark U.S. Treasury 10-year note is currently trading around the 0.6% level.

Technically, August gold futures bulls have the strong overall near-term technical advantage, to suggest still more upside in the near term. Prices are in an accelerating seven-week-old uptrend on the daily bar chart. Gold bulls' next upside near-term price objective is to produce a close above technical resistance at $2,000.00. Bears' next near-term downside price objective is pushing prices below solid technical support at $1,850.00. First resistance is seen at today’s high of $1,974.70 and then at $2,000.00.

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