Gold prices back off on profit taking, upbeat trader attitudes

New York (May 18)  Gold prices have lost overnight gains and are trading down in morning U.S. dealings Monday, after scoring gains overnight and hitting a five-week high. Silver is higher but well down from overnight highs that saw prices hit an 11-week high. The spot gold market saw prices reach a seven-year high overnight. The precious metals were rallying at the same time global stock markets were doing the same overnight and in very early U.S. trading. However, when U.S. stock indexes pushed solidly higher on a very positive report on the drug firm Moderna’s effort to find a vaccine for Covid-19, gold and silver prices backed way off their overnight highs as the U.S. stock market surged on the Moderna news. June gold futures were last down $7.00 an ounce at $1,749.40. July Comex silver prices were last up $0.25 at $17.32 an ounce.

Global stock markets were mostly firmer in overnight trading. As the world’s major economies have started to reopen, there is some encouraging news on the Covid-19 pandemic front. Reports say the rate of increase of new infections is at the slowest pace in months. Federal Reserve Chairman Jerome Powell said over the weekend the U.S. economy could recover steadily through the second half of the year, under the condition that there is no second wave of Covid-19. Powell said the Fed still has more ammunition to stimulate the U.S. economy, if it’s needed, adding there needs to be a vaccine for the economy to fully recover and that may be more than a year away.

In overnight news, Japan, the world’s third-largest economy, sank into recession in the first quarter, as its gross domestic product contracted by 3.4% in the period.

The important outside markets see Nymex crude oil futures sharply higher early today, at a five-week high, and trading around $32.25 a barrel in the June contract, which expires late this week. Many were predicting the June contract would expire the way the May contract did—in negative territory. The U.S. dollar index is near steady early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.65%.

U.S. economic data due for release Monday is light and includes the NAHB housing market index.

Technically, the gold bulls have the solid overall near-term technical advantage amid an uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the April high of $1,788.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,666.20. First resistance is seen at the overnight high of $1,775.80 and then at $1,788.80. First support is seen at $1,750.00 and then at Friday’s low of $1,736.80.

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