Gold Sees Modest Profit Taking After Hitting 15-Mo. High Monday

(Kitco News) - The gold market saw some modest profit-taking pressure kick in from the shorter-term futures traders at late-morning Tuesday, after June Comex gold hit a 15-month high of $1,306.00 Monday. The U.S. dollar index also saw a corrective bounce today, after notching an eight-month low overnight. The firmer greenback today and weaker crude oil prices were also negative outside markets for the precious metals on this day. June Comex gold was last down $6.50 at $1,289.30 an ounce. July Comex silver was last down $0.267 at $17.415 an ounce.

It was a risk-off day in the marketplace Tuesday, which did limit the selling pressure in safe-haven gold. Most world stock markets were under pressure Tuesday after some weak manufacturing data coming out of China, the world’s second-largest economy. The Caixin purchasing managers’ index (PMI) came in a 49.4 in April from 49.7 in March. A reading below 50.0 suggests contraction in the sector. April marked the 14th  month in a row of a number below 50.0.

In other overnight news, the Australian central bank cut its interest rate by 0.25%, to 1.75%. The move was not a big surprise to the marketplace.

The European Union said in a report Tuesday that it sees weaker Euro zone growth this year, mainly due to the economic growth slowdown coming from China. The European Commission now sees the Euro zone’s GDP at 1.6% in 2016, from the 1.7% rise it forecast in February.

A weakening U.S. dollar index that fell to another eight-month low overnight has been a bullish element for the raw commodity sector recently. Interestingly, a report coming out of China said speculators in China are very heavily trading markets like steel bars and other commodities that normally don’t see high trading volumes. This is yet another clue that many in the marketplace think the raw commodity bust has ended and that a boom is developing in the sector.

The other “outside market” saw Nymex crude oil prices lower Tuesday, and hovering just below $44.00 a barrel. Reports said major oil-producing countries are still pumping almost flat-out, in an already glutted world oil market.

News reports said Monday’s price action saw the largest daily money inflow to the gold ETF, SPDR Gold Trust, in five years.

Technically, June gold futures prices closed nearer the session low today. The gold bulls still have the solid overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid longer-term technical resistance at $1,307.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at 1,250.00. First resistance is seen at $1,300.00 and then at this week’s high of $1,306.00. First support is seen at today’s low of $1,284.00 and then at $1,273.00. Wyckoff’s Market Rating: 7.5

July silver futures prices closed nearer the session low today, on more profit taking after hitting a 15-month high on Monday. There was good follow-through selling pressure today and a bearish “key reversal” down was confirmed on the daily bar chart, which is an early technical clue that the silver market has put in a near-term top. The silver market bulls still have the firm overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.80. First resistance is seen at today’s high of $17.76 and then at this week’s high of $18.06. Next support is seen at $17.25 and then at $17.00. Wyckoff's Market Rating: 7.5.

July N.Y. copper closed down 480 points at 221.80 cents today. Prices closed nearer the session low. The key “outside markets” were bearish for copper today as the U.S. dollar index was higher and crude oil prices were lower. The copper bulls and bears are on a level overall near-term technical playing field. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the March high of 232.90 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the April low of 207.90 cents. First resistance is seen at 225.00 cents and then at today’s high of 226.95 cents. First support is seen at last week’s low of 220.10 cents and then at 217.50 cents. Wyckoff's Market Rating: 5.0.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com