Gold prices are modestly lower in early U.S. trading Tuesday, on a technical correction and mild profit taking from recent gains that saw prices hit a 3.5-month high of $1,332.40 overnight, basis April Comex futures. The gold market bulls are still enjoying the near-term technical advantage for the first time in months. Gold prices have appreciated by more than $100.00 an ounce since the beginning of January. April gold was last down $3.70 at $1,314.90 an ounce. Spot gold was last quoted down $14.50 at $1,315.25. March Comex silver last traded down $0.006 at $21.415 an ounce.

It’s a calm trading week so far, with U.S. traders and investors coming back from a three-day holiday weekend. In overnight news, the Bank of Japan made a de facto monetary policy stimulus move Tuesday following weak gross domestic product data released Monday. The BOJ offered incentives to Japanese banks to lend more money. The Nikkei stock index rallied sharply and the yen weakened on the BOJ move. Japanese government officials continue to work to get out of a deflationary cycle that has been in place for many years.

Meantime, China’s central bank used repurchase agreements to drain liquidity from its financial system—the second straight week of such a move. The Chinese central bank is trying to curb bank lending a bit after a rise in lending in January.

In the European Union, the closely watched German ZEW economic expectations survey unexpectedly fell to 55.7 in February from 61.7 in January.

A little-noticed development in the market place in recent weeks has been a general rebound in the raw commodity sector. It is my bias that sector has hit a cycle low and raw commodities will see better times just ahead. That includes gold and silver. And if the raw commodity sector does continue to see a general rebound, it can be extrapolated that the U.S. stock market does not have much more upside price potential. The U.S. stock indexes peaking out and trending sideways to lower in the coming weeks and months would be another bullish development for the gold and silver markets.

U.S. economic data due for release Tuesday includes the Empire State manufacturing survey, Treasury international capital data, and the NAHB housing market index.

Wyckoff’s Daily Risk Rating: 5.0 (The world market place remains calm this week.)

(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 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,314.00 versus the P.M. fixing of $1,327.50.

Technically, April gold futures Tuesday hit a 3.5-month high and see a seven-week-old uptrend in place on the daily bar chart. The gold bulls have the near-term technical advantage and their next upside near-term price breakout objective is to produce a close above technical resistance at $1,360.00. Bears' next near-term downside breakout price objective is closing prices below technical support at $1,280.00. First resistance is seen at  $1,325.00 and then at the overnight high of $1,332.40. First support is seen at $1,310.00 and then at $1,300.00.  

March silver futures bulls also now have the overall near-term technical advantage as prices hit a more-than-three-month high overnight. Prices are in a three-week-old uptrend on the daily bar chart. Importantly, silver futures have seen a bullish upside “breakout” from a recent choppy and sideways trading range at lower price levels. This suggests a price uptrend can continue in silver.  Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $22.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $20.00. First resistance is seen at $21.75 and then at the overnight high of $21.97. Next support is seen at the overnight low of $21.315 and then at $21.00.

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