(Kitco News) - Gold prices are moderately higher and have hit another three-week high in early U.S. trading Wednesday, on safe-haven demand and a less-bearish near-term chart posture. December Comex gold was last up $9.90 at $1,117.60 an ounce. September Comex silver was last up $0.061 at $15.345 an ounce.

It’s a “risk-off” day in the market place Wednesday, and that is benefitting safe-haven gold. World stock markets are selling off as the Chinese government on Wednesday again moved to devalue its currency, the yuan, by 1.6%, after dropping its value against the U.S. dollar by 1.9% on Tuesday. China has been implementing economic and monetary measures to stimulate its flagging economy.

China’s devaluation of the yuan this week calls into question whether the U.S. Federal Reserve will be able to raise interest rates as soon as it wants. The yuan devaluation, slumping raw commodity markets, led by crude oil, and weaker economic data coming out of the European Union all hint of deflationary price pressures building. The Fed does not want to contribute to that scenario, which would seemingly be the case if it initiated a rate hike, which in turn would likely see a further appreciation of the U.S. dollar. This thinking is also likely pressuring the U.S. dollar index Wednesday.

China got more disappointing economic news Wednesday when it was reported its industrial output rose 6.0% in July, year-on-year, following a 6.8% rise in June. A 6.6% rise was expected in July.

There was another downbeat economic report coming out of the European Union Wednesday, as Euro zone industrial production in June was down 0.4% from May and up 1.2% year-on-year. Forecasters had expected a 0.1% drop in June from May. Euro zone GDP data is released Friday.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey and the weekly DOE liquid energy stocks report.

(Note: Follow me on Twitter--@jimwyckoff--for breaking market news.)

Wyckoff’s Daily Risk Rating: 2.5 (Trader and investor market risk aversion is keener at mid-week, following the surprise moves by China to devalue the yuan.)

(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 $1,116.80 versus the previous P.M. fix of $1,108.25.

Technically, December gold futures bears still have the overall near-term technical advantage. However, prices this week have seen a bullish upside “breakout” from the recent sideways trading range at lower price levels, to suggest a near-term market bottom is in place. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,133.80. Bears' next near-term downside price breakout objective is closing prices below solid technical support at the July low of $1,073.70. First resistance is seen at the overnight high of $1,119.40 and then at $1,125.00. First support is seen at $1,110.00 and then at $1,100.00. Wyckoff’s Market Rating: 2.5

September silver futures bears still have the near-term technical advantage. However, there are also clues the silver market has put in a bottom, including a rounding-bottom reversal pattern forming on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the July high of $15.90 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the July low of $14.33. First resistance is seen at this week’s high of $15.38 and then at $15.50. Next support is seen at the overnight low of $15.125 and then at $15.00. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff

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