Gold Rebounds from Heavy Selling Pressure Monday; Yellen on Deck

New York (July 15)  Gold prices on Tuesday morning are seeing a corrective bounce from the big sell off seen Monday. Focus of the market place Tuesday is on Fed Chair Janet Yellen, who speaks on monetary policy to the U.S. Congress. August Comex gold was last up $4.20 at $1,311.00 an ounce. Spot gold was last quoted up $2.70 at $1,310.00. December Comex silver last traded up $0.131 at $21.105 an ounce.

The gold and silver bulls were hit hard Monday and need to recover very quickly to avoid near-term chart damage. Price action Tuesday and Wednesday will be extra important for the gold and silver markets. Rebounds in prices would suggest prices can work to maintain their recent uptrends. Good follow-through selling pressure would suggest near-term price uptrends are finished and that prices could work sideways to lower in the coming weeks.

One ominous clue for both gold and silver, and the rest of the raw commodity sector, is the recent sharp downturn in the Goldman Sachs Commodity Index (GSCI). Gold and silver held up well during last week’s shellacking in the general raw commodity sector, but the pummeling appeared to catch up with those two metals Monday.

The lack of fresh concerns about the geopolitical front have led to better risk appetite in the market place early this week, at the expense of safe-haven gold. However, four situations remain simmering on low heat on the back burner of the market place: the European Union sovereign debt crisis, the Iraqi civil war, the latest flare-up between Israel and Hamas, and the Russia-Ukraine tensions. Any one, or more, of these conflicts could quickly move to the front burner--and gold would likely see good safe-haven demand quickly develop.

The highlight of the trading week is likely to be testimony on U.S. monetary policy from Federal Reserve Chair Janet Yellen before the U.S. Congress on Tuesday and Wednesday. The worry in the market place is that Yellen’s comments may sound a more hawkish tone than in her previous remarks.

U.S. corporate earnings reports will also be featured this week. So far, major companies’ earnings have been upbeat.

In overnight news there was yet another downbeat economic report coming out of the European Union. The German ZEW economic expectations index came in at 27.1 in July versus 29.8 in June. The forecast was for a reading of 28.0. On Monday the International Monetary Fund (IMF) urged the European Central Bank to implement quantitative easing of its monetary policy, to help spur economic growth and to ward of deflationary price pressures.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, import and export prices, retail sales, the Empire State manufacturing survey, and manufacturing and trade inventory and sales.