Updated: A.M. Kitco Metals Roundup: Comex Gold Sharply Higher, Pushes Above $1,600, amid Bullish “Outside Markets,” Risk-On Trading Day
By Jim Wyckoff
Comex gold futures prices are sharply higher and have pushed above the key $1,600.00 level in early U.S. trading Friday. The precious metals and many other markets are rallying strongly in the wake of surprising results coming out of the European Union summit meeting in Brussels. Heavy short covering is a feature in both the gold and silver futures markets Friday morning. August gold last traded up $47.80 at $1,598.20 an ounce. Spot gold was last quoted up $45.50 an ounce at $1,598.00. July Comex silver last traded up $1.423 at $27.67 an ounce.
It’s a big “risk-on” day in the market place so far Friday as the Euro currency rallies and U.S. dollar index sinks as European Union leaders at their summit meeting have agreed upon several significant measures to confront the EU debt crisis, including establishing a single banking supervisor and the European Central Bank being able to funnel rescue funds directly to troubled banks. The EU rescue funds will also be allowed to buy bonds from distressed EU countries.
Gold has decided to act like a risk asset Friday and is following the general strong rally in the raw commodity sector.
The EU summit is considered a success given the scant progress that was expected. The surprise coming out of the summit was that Germany came into the meeting amid hawkish comments from Chancellor Angela Merkel, but she apparently significantly softened her stance at the meeting. Still, caution remains as “the devil is in the details” of the new measures actually being implemented and working. European bond yields did back down Friday on the EU summit news. One market watcher put it well when he said the EU summit results brings some relief to the market place but it’s certainly not a game-changer.
Asian and European stock markets rallied on the EU summit news, while U.S. stock indexes are higher in early screen trading.
Traders are also awaiting fresh Chinese economic data over the weekend.
Friday is an extra important trading day from a technical perspective as it’s the last trading day of the month and of the quarter.
The U.S. dollar index is sharply lower Friday morning and sees profit taking from ercent gains and is pressured by the strong Euro currency Friday. The greenback bulls still have the overall near-term technical advantage. Meantime, Nymex crude oil futures prices are sharply higher on the EU news and on short covering in a bear market. Crude oil remains in an overall bearish fundamental and technical posture.
The London A.M. gold fix is $1,569.50 versus the previous London P.M. fixing of $1,558.50.
U.S. economic data due for release Friday includes personal income and outlays, the ISM Chicago business survey, and the University of Michigan consumer sentiment survey.
Technically, August gold futures bears still have the overall near-term technical advantage as trading has been choppy recently. However, a bullish weekly high close on Friday would provide the bulls with some fresh upside near-term technical momentum. The gold bulls’ next upside price breakout objective is to produce a close above solid technical resistance at the June high of $1,642.40. Bears’ next near-term downside price objective is closing prices below solid technical support at this week’ low of $1,547.60. First resistance is seen at $1,610.00 and then at $1,616.30. First support is seen at $1,580.00 and then at $1,575.00.
July silver futures are seeing heavy short covering and bargain hunting Friday after hitting a fresh 1.5-year low on Thursday. Silver bears still have the overall near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $29.095 an ounce. The next downside price breakout objective for the bears is closing prices below major psychological support at $25.00. First resistance is seen at $28.00 and then at $28.50. Next support is seen at $27.00 and then at $26.51.