Gold Price Weaker on Bearish Technicals, Outside Markets; FOMC on Deck
New York (July 28) Gold prices are modestly lower in early U.S. trading Tuesday. A calmer market place Tuesday, bearish outside market forces on this day and a negative chart posture are all allowing the gold sellers to remain confident. December Comex gold was last down $2.80 at $1,094.20 an ounce. September Comex silver was last down $0.04 at $14.565 an ounce.
This week’s sharp sell-off in the Chinese stock market is still giving the market place some pause, but the anxiety seen Monday has mostly dissipated Tuesday. The China stock market on Monday saw the biggest one-day drop in eight years, as the Shanghai composite index was down 8.5%. The index fell another 1.5% Tuesday, but did close well up from its daily low. The selling pressure in China equities is coming from concerns the Chinese government will not continue its recent efforts to support Chinese share prices. China has the world’s second-largest economy and is the world’s largest raw commodity importer. Some market watchers reckon the troubles in China’s stock market and its sputtering economy could cause the U.S. Federal Reserve to delay its plans to raise its interest rates.
Crude oil prices hit another four-month low Tuesday, partly on the China worries and amid a glut of oil on the world market. It’s becoming more likely that in the coming weeks gold will dip into the $30s per barrel, at least briefly. The other “outside market” on Tuesday morning finds the U.S. dollar index higher. The greenback bulls have lost some power the past week as trading has turned choppy and the near-term price uptrend in the dollar index has stalled.
Traders are looking forward to the Federal Open Market Committee (FOMC) meeting that begins Tuesday morning and ends with a statement Wednesday afternoon. As has been the case for the past several meetings, traders and investors will parse the statement, seeking clues on the precise timing of the Fed’s looming interest rate rise.
A report from the GFMS metals group said world demand for gold in the second quarter of this year was the lowest since 2009. Physical gold demand was down 14% from last year. The report said gold demand from China was especially weak due to the bull market run in China stocks earlier this year pulling funds away from gold.
U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the Case-Shiller home price index, the U.S. flash services PMI, the Richmond Fed business survey, and the consumer confidence index.
Wyckoff’s Daily Risk Rating: 2.0 (Trader and investor market risk aversion is only somewhat elevated Tuesday due to worries about China.)
(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 5, with 1 being least risk-averse (most risk-on) and 5 being the most risk-averse (risk-off).
The London A.M. gold fix is $1,095.60 versus the previous P.M. fix of $1,100.00.
Technically, December gold futures bears still have the solid overall near-term technical advantage. Prices are in a 10-week-old downtrend on the daily bar chart. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,133.80. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,050.00. First resistance is seen at $1,100.00 and then at Monday’s high of $1,104.90. First support is seen at Monday’s low of $1,088.00 and then at $1,080.00. Wyckoff’s Market Rating: 1.5
September silver futures bears have the solid near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $15.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.00. First resistance is seen at Monday’s high of $14.74 and then at last week’s high of $14.96. Next support is seen at last week’s low of $14.33 and then at $14.25. Wyckoff's Market Rating: 1.0.
Source: KitcoNews
