Gold and silver weaker on normal downside price corrections
New York (July 28) Gold and silver prices are lower in early U.S. trading Tuesday after gold overnight and hit a new record high of $1,974.70, basis nearby Comex futures. Silver prices hit a more-than-seven-year high of $26.275 overnight. Both markets are seeing normal downside price corrections in solid uptrends, as the shorter-term futures traders take some profits from the recent gains. However, look for bargain hunters to soon step in to buy the dips in still-very-powerful bull market runs in both metals. August gold futures were last down $7.90 an ounce at $1,923.10. September Comex silver prices were last down $0.626 at $23.875 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 pointed toward weaker openings when the New York day session begins. 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 $41.35 a barrel. The U.S. dollar index is firmer on a 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.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the S&P-Core Logic-Shiller home price index, the Richmond Fed business survey, and the consumer confidence index.
Technically, the gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,880.00. First resistance is seen at $1,950.00 and then at the overnight high of $1,974.70. First support is seen at $1,900.00 and then at $1,880.00.
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