Rebound In U.S. Dollar Index Spooks Gold Market Bulls
New York (May 13) Gold prices ended the U.S. day session modestly lower Tuesday. The metal got an early lift from a U.S. retail sales report that showed only tepid growth and did not meet market expectations. However, the modest gains were eroded by the recent sharp rebound in the value of the U.S. dollar against the Euro currency. June gold was last down $2.40 at $1,293.40 an ounce. Spot gold was last quoted down $2.10 at $1,294.00. July Comex silver last traded down $0.018 at $19.525 an ounce.
U.S. retail sales in April rose by just 0.1%, missing the expected growth rate of 0.4%. Gold moved up from lower levels in the immediate aftermath of the report, as it falls into the camp of U.S. monetary policy doves. However, the strength of the U.S. dollar index cast another bearish pall over the gold market. U.S. dollar index hit a five-week high on Tuesday.
In overnight news, the closely watched German ZEW economic expectations index was released Tuesday and saw confidence decline in May for the fifth month in a row, at 33.1 versus 43.2 in April. The German Bundesbank on Tuesday threw its support behind a likely upcoming move by the European Central Bank to ease its monetary policy. The Bundesbank is very worried about price deflation in the European Union. That news helped to sink the Euro currency and in turn boost the U.S. dollar index.
The Russia-Ukraine situation has not changed much recently, as the market place views it. While tensions are still high in the region, traders and investors have become lackadaisical on the matter. Such is evident by rallying world stock markets, including U.S. indexes hitting all-time highs Monday. It will take a major new development in the situation to shake the market place out of its malaise regarding the Ukraine-Russia conflict—which is likely to occur at some point down the road.
In other news, the Organization for Economic Cooperation and Development (OECD) reported China’s economic growth rate will continue to slow in the coming months, while other countries’ economies will see steady growth. Meantime, China’s industrial output grew by 8.7% in April, year-on-year, but was below expectations. To repeat what I’ve said many times, China’s economic numbers (if one can believe them) are still the envy of the major world economies. I suspect the bigger worry is that China’s ballooning economy comes with its financial system that is untested during the boom times. Economic history shows that booming economies are followed by busts—and as they say, the bigger they are the harder they fall.
The London P.M. gold fixing today was $1,296.50 versus the previous P.M. fixing of $1,298.75.
Technically, June gold futures closed prices closed near mid-range Tuesday. Gold bears have the slight overall near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the May high of $1,315.80. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at the April low of $1,268.40. First resistance is seen at $1,300.00 and then at this week’s high of $1,304.50. First support is seen at Tuesday’s low of $1,289.10 and then at $1,280.00. Wyckoff’s Market Rating: 4.5
July silver futures closed near mid-range Tuesday. The bears have the overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. However, recent sideways and choppy trading action on the daily chart could be some “basing” action that puts in market bottoms. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the May high of $19.77 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the May low of $18.685. First resistance is seen at this week’s high of $19.67 and then at $19.77. Next support is seen at Tuesday’s low of $19.365 and then at $19.25. Wyckoff’s Market Rating: 2.5.
July N.Y. copper closed down 205 points at 312.90 cents Tuesday. Prices closed nearer the session low on profit taking from recent gains and on the stronger USDX. Copper bulls have the overall near-term technical advantage as prices Monday hit a nine-week high. Prices are also in a two-month-old uptrend on the daily bar chart. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at 325.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 300.00 cents. First resistance is seen at this week’s high of 315.55 cents and then at 318.00 cents. First support is seen at Tuesday’s low of 312.20 cents and then at 310.00 cents. Wyckoff’s Market Rating: 6.0.