Gold price firmer as charts still favor the bulls

(Kitco News, Wed. Aug 7th, 2024) – Gold prices are up a bit and silver prices slightly weaker in early U.S. trading Wednesday. The marketplace has calmed down at mid-week, which has many traders back to focusing on technical charts, which still favor the gold market bulls and is supporting the modest price gains today. December gold was last up $9.10 at $2,440.60. September silver was down $0.106 at $27.115.

Asian and European stock indexes were mostly higher overnight. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins, after hitting three-month lows Monday. Risk aversion has significantly receded at mid-week, after the recent rout in the U.S. and global stock indexes. The rally in global stock markets the past couple days has limited the upside in safe-haven gold and silver, from a competing asset class perspective.

The Bank of Japan further assuaged the marketplace Wednesday when a BOJ official said the BOJ likely won’t raise interest rates more for quite some time. Dow Jones Newswires reports: “A week after Japan’s top central banker shook up global markets with comments about raising interest rates, one of his deputies walked them back Wednesday and promised not to raise rates when markets are unstable.” The BOJ deputy’s comments helped to rally Japan’s stock market and pressured the Japanese yen. The Nikkei stock index gained 1.2% Wednesday after a weaker start to the trading day.

Said broker SP Angel in a morning email dispatch: “We have little doubt that Japanese equities fell as the carry trade started to unwind, with carry traders buying yen with U.S. dollars while selling local equities. Negative Japanese interest rates had created a significant carry trade, with traders borrowing cheaply in Japan while benefitting from higher returns in Japanese equities, US Treasuries, technology companies, etc. While these trades can unwind fast, there is still plenty of margin left in the carry trade, with BOJ rates at 0.25%. More importantly, the BOJ plans to unwind its massive bond buying program as they invoke quantitative tightening. While a relatively small adjustment in rates can prompt a lot of momentum and algorithm-driven selling, we suspect the carry trade will continue to run and generate margins off higher-yielding U.S. treasuries and equities.
We suspect markets will continue to experience elevated volatility while adjustments are made to Japanese and US interest rates.”

In other overnight news, China’s January through July exports were reported up 4.0%, year-on-year, while imports in the same period were up 2.8%. Exports in the month of July were reported up 7.0%, year-on-year, while imports were up7.2%. July exports were less than expected but imports were more than expected in July.

Worries about a broad Middle East war are still near the front burner of the marketplace. Israel is bracing for a major attack from Iran and its proxies after Israel recently assassinated key military officials from Hamas and Hezbollah. This matter could be the next major geopolitical event that rattles the marketplace.

The key outside markets today see the U.S. dollar index higher on a continued rebound after hitting a 4.5-month low Monday. Nymex crude oil prices are higher and are trading around $74.25 a barrel. The benchmark 10-year U.S. Treasury note is presently fetching 3.92%.

U.S. economic reports out Wednesday include the weekly MBA mortgage applications survey, consumer credit and the weekly DOE liquid energy stocks report.

Technically, December gold bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $2,537.70. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,350.00. First resistance is seen at Tuesday’s high of 2,459.50 and then at $2,475.00. First support is seen at the overnight low of $2,318.80 and then at this week’s low of $2,403.80.

September silver futures bears have the overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at last week’s high of $39.355. The next downside price objective for the bears is closing prices below solid support at $26.00. First resistance is seen at Tuesday’s high of $27.67 and then at $28.00. Next support is seen at this week’s low of $26.595 and then at $26.00.

Posted by:

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com