Commodities » Precious Metals
Gold and silver daily commentary (August 17, 2010)
By Nell Sloane
While equity markets in Asia were mixed, stock indices in Europe are generally higher this morning. U.S. stock indices are trading moderately higher during the early Tuesday trade. The Dollar is weaker against most major currencies during overnight trading, although posting gains versus the Yen and Swiss. The Japanese Prime Minister will meet this week with the head of the Bank of Japan, as the Japanese government considers new stimulus measures for their economy. Ireland had a well received auction of 4-year and 10-year bonds, with both issues having bid to cover ratios well above 3-to-1. The UK Finance Minister stated that deficit reduction is the only way to navigate a choppy recovery. A private survey of German Economic Sentiment came in at its lowest level in over a year, and lower than expectations. The UK Consumer Price Index for July was up 3.1%, in line with forecasts. The Euro zone current account surplus for July was 1 billion Euros, lower than expected and down from last year's levels. Today's US economic numbers released this morning will include the July Consumer Price Index and July Housing Starts and Permits at 7:30 AM, July Industrial Production and Capacity Utilization at 8:15 AM, and two private surveys of retail store sales.
GOLD MARKET FUNDAMENTALS:
Despite early gains in US equities, gold has managed a positive start to the second trading session of the new week. Perhaps talk from noted trader George Soros that investors should move out of equities and into gold is providing gold with its initial support today. However, the Dollar is also weaker this morning and therefore the currency impact would seem to be providing the gold market with some initial support. Other issues that might be favoring the bull camp this morning in gold were disappointing German ZEW current conditions readings and a call for an 11 trillion Japanese Yen stimulus package. The German ZEW headline figure slide was apparently offset by a very strong forward expectations reading. The gold market will also be presented with corporate earnings from Home Depot and Wal-Mart, and that could impact the gold trade. It should also be noted that gold will see an extremely active scheduled US report window this morning, with the gold market recently garnering support from signs of weakness in the US economy. The gold market was also presented with more evidence of rising gold production overnight, but recently that type of news doesn't seem to be given much attention. Comex Gold Stocks were 11.033 million ounces down 57,155 ounces. Comex Gold stocks are at the lowest in the past 10 readings. There would not seem to be a reason to abandon the bullish track in gold prices. In fact, the economic readings overnight were soft and the trade saw the Japanese float the idea of an 11 trillion Yen stimulus package, and both of those stories seem to extend the bull's recent argument. The trade is also talking about mproving seasonal demand and with the Dollar showing signs of weakness, the path of least resistance in gold prices would appear to be up. Therefore critical support looks to have moved up to $1,225 and there might not be much in the way of resistance until the $1,236 level, which is the underside of the late June consolidation.
SILVER MARKET FUNDAMENTALS:
The September silver contract has managed to forge a rise above the $18.50 level in the initial overnight action, and in the process the silver market reached the highest level since August 6th. It is possible that silver is garnering some spillover buying from news that famed currency fund trader George Soros is advising investors to reduce equity ownership in favor of gold. With a weaker US Dollar also being seen this morning, it is possible that silver is garnering some indirect support from the currency market action. Despite seeing slack German economic readings overnight, the silver market is being presented with initially higher US equity market trade and talk of an 11 trillion Japanese Yen stimulus package. Comex Silver Stocks were 110.499 million ounces down 65,883 ounces. Stocks have declined 11 of the last 20 days. With an initial upside breakout on the charts early today, that would seem to leave the silver market within a bull track. However, there could be some resistance seen up at the $18.70 level, with a potentially critical pivot point support level seen down at $18.40. It is somewhat difficult to argue against the upward bias, even if the gains recently have come on relatively weak volume. The bulls have control, but we are just not convinced that the silver market has the capacity to forge an upside breakout on the charts.
METALS TECHNICAL OUTLOOK:
Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report.
COMEX GOLD (DEC) 08/17/2010: Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. Since the close was above the 2nd swing resistance number, the market's posture is bullish and could see more upside follow-through early in the session. The near-term upside target is at 1237.9. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1233.1 and 1237.9, while 1st support hits today at 1219.9 and below there at 1211.4.
COMEX SILVER (SEP) 08/17/2010: The cross over and close above the 60-day moving average indicates the longer-term trend has turned up. A bullish signal was given with an upside crossover of the daily stochastics. Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The market's short-term trend is positive on the close above the 9-day moving average. There could be more upside follow through since the market closed above the 2nd swing resistance. The near-term upside target is at 1873.7. The next area of resistance is around 1859.5 and 1873.7, while 1st support hits today at 1820.5 and below there at 1795.8.
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