Weak U.S. Data Pushes Gold, Silver Prices Sharply Higher

(Kitco News) - Gold and silver futures prices ended the U.S. day session sharply higher and hit three-week highs Tuesday. Overnight gains in both metals were solidly extended after the morning release of a very downbeat U.S. ISM non-manufacturing report for August. Today’s big gains followed Friday’s price advances that produced technically bullish weekly high closes in gold and silver. December Comex gold was last up $28.80 an ounce at $1,355.60. December silver futures were up $0.772 at $20.19 an ounce.

The U.S. non-manufacturing purchasing managers index reading for August was 51.4 versus July's 55.5. A reading of 55.5 was expected for August. That was the lowest reading in six years. Other indicators in the ISM report also missed to the downside of market expectations. Today's ISM data also put very strong downside price pressure on the U.S. dollar index, which was friendly to the precious metals markets bulls.

The weaker-than-expected ISM report comes on the heels of a slightly downbeat U.S. jobs report for August, which was released last Friday. This recent U.S. economic data plays right into the hands of the U.S. monetary policy doves, who do not want to see the Federal Reserve raise interest rates any time soon. Such a scenario would also be bullish for the precious metals markets.

Market watchers are now awaiting Thursday’s meeting of the European Central Bank. The ECB will issue fresh economic forecasts and assessments at this meeting. The consensus for this meeting is that the ECB will make no significant moves on EU monetary policy.

The over key “outside market” was in a mildly bullish posture for the precious metals markets Tuesday. Crude oil prices were slightly higher following news reports Monday that Russia and Saudi Arabia said they would work together to prop up the sagging crude oil market. However, upon reflection, most analysts concluded the rhetoric contained no strong commitments from either country on the matter.

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Technically, December gold futures prices closed near the session high and hit a three-week high today. The gold bulls have regained the near-term technical advantage. A two-month-old downtrend on the daily bar chart has been negated. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the August high of $1,374.20. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at last week’s low of $1,305.50. First resistance is seen at $1,364.30 and then at $1,374.20. First support is seen at $1,350.00 and then at $1,340.00. Wyckoff’s Market Rating: 6.5

December silver futures prices closed near the session high and hit a three-week high today. The silver market bulls have regained the overall near-term technical advantage. A four-week-old downtrend on the daily bar chart has been negated. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the July high of $21.25 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the August low of $18.46. First resistance is seen at today’s high of $20.22 and then at $20.50. Next support is seen at $20.00 and then at $19.75. Wyckoff's Market Rating: 6.5.

December N.Y. copper closed up 125 points at 209.05 cents today. Prices closed nearer the session high and scored a mildly bullish “outside day” up on the daily bar chart today. Short covering was featured as prices last week hit a 2.5-month low. The copper bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the 218.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the June low of 203.15 cents. First resistance is seen at today’s high of 209.90 cents and then at 212.00 cents. First support is seen at last week’s low of 206.95 cents and then at 205.00 cents. Wyckoff's Market Rating: 3.0.

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