Gold Sees Modest Upside Correction; FOMC Minutes On Deck
New York (May 20) Gold prices are posting slight gains in early U.S. trading Wednesday, on a corrective bounce from the strong selling pressure seen Tuesday. A resurgent U.S. dollar index this week continues to be a bearish outside market force working against the precious metals markets. June Comex gold was last up $2.30 at $1,209.00 an ounce. July Comex silver was last up $0.064 at $17.135 an ounce.
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. Recent U.S. economic data has been a mixed bag and has provided no solid clues on when the FOMC might make an interest-rate hike.
The feature in the market place so far this week has been the resurgent U.S. dollar index.
The index is a basket of six major world currencies weighted against the greenback. Many raw commodity markets, including the precious metals, have been hit hard this week, mainly due to the appreciation of the dollar.
The stronger dollar this week has changed many analysts’ notions about the FOREX market price trends. As the dollar index hit a nearly four-month low last week many market watchers were saying the buck had peaked out and the Euro currency had bottomed out. However, this week’s price action has just as many market watchers wondering if the recent dollar weakness and Euro strength were just normal technical corrections amid strong longer-term price trends in both currencies—up for the dollar index and down for the Euro. Price action this week in the dollar index and Euro will be extra important. At the end of the trading day on Friday, if the U.S. dollar index is near its weekly high and if the Euro is near its weekly low, such would suggest the existing longer-term price trends in both are alive and well, and will continue.
Reports overnight said there is progress being made in the Greece-EU/IMF debt restructuring talks. The existing bailout deal expires in June. The reports said Greece will run out of cash in June without a new cash infusion from its EU-IMF creditors. Despite the progress reportedly being made, this is a big, messy situation that will continue to cause major problems for the European Union. This is a major underlying bearish factor for the Euro currency.
The Bank of England’s minutes of the latest monetary policy meeting, released Wednesday, showed the BOE reckoned U.K. economic growth will accelerate in the second quarter, following a slow start to the first quarter.
Japan’s first-quarter GDP came in at up 2.4%, year-on-year, which was much stronger than the expected 1.5% rise. The GDP quarterly number was the best in in a year.
Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey and the weekly DOE liquid energy stocks report.
The London A.M. gold fix is $1,206.75 versus the previous P.M. fix of $1,214.30.
Technically, June gold futures bears have the overall near-term technical advantage and gained some fresh momentum Tuesday. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,232.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,190.00. First resistance is seen at the overnight high of $1,212.50 and then at $1,220.00. First support is seen at the overnight low of $1,202.70 and then at $1,200.00. Wyckoff’s Market Rating: 3.0
July silver futures are seeing a corrective pullback after hitting a nearly four-month high Monday. Prices are still in a four-week-old uptrend on the daily bar chart but the bulls need to show fresh power very soon to keep the uptrend in place. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $17.775 an ounce.
Source: KitcoNews
