Gold Ends Sharply Higher

Posted by Jim Wyckoff via Kitco

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On Short Covering, China News, Weaker U.S. Dollar.

Comex gold futures prices rallied sharply in late-morning dealings to end the U.S. day session with solid gains. Both gold and silver saw heavy short-covering following selling pressure seen earlier this week, with some bargain hunting also featured. The weaker U.S. dollar index Thursday was also a supportive outside market factor for the precious metals markets. Chinese economic data released Thursday was also bullish for most of the market place and especially for the raw commodity sector. China exports were up a much higher than expected 5.1% year-on-year in July, compared to a 3.1% drop in June. Chinese imports rose by a much higher than expected 11%, year-on-year. December gold was last up $23.80 at $1,309.10 an ounce. Spot gold was last quoted up $22.70 at $1,310.50. September Comex silver last traded up $0.667 at $20.175 an ounce.

The gold and silver market bulls had good days Thursday, but have more heavy lifting to do in the near-term to get healthy from a charts perspective.

In other news Thursday, the European Central Bank released a forecast Thursday that shows it expects Euro zone economic growth to contract by 0.6% in 2013, citing weak consumer demand worldwide. The ECB forecast Euro zone growth in 2014 at up 0.9%. The ECB report comes out at a time when recent Euro zone economic data has shown generally slight improvement.

The U.S. dollar index was weaker again Thursday and hit another six-week low overnight. The greenback bears have the overall near-term chart advantage, which is an underlying bullish factor for the precious metals markets. Meantime, Nymex crude oil futures prices were solidly lower Thursday. The crude oil bulls have faded this week and a bearish double-top reversal pattern has formed on the daily bar chart.

The London P.M. gold fix is $1,298.25 versus the previous P.M. fixing of $1,282.50.

Technically, December gold futures prices closed nearer the session high Thursday. Gold bears still have the overall near-term technical advantage. However, a bullish weekly high close on Friday would give the bulls some fresh upside near-term technical momentum. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,350.00. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at this week’s low of $1,271.80. First resistance is seen at Thursday’s high of $1,313.80 and then at this week’s high of $1,320.30. First support is seen at $1,300.00 and then at $1,290.00. Wyckoff’s Market Rating: 3.0

September silver futures prices closed nearer the session high Thursday and closed at a two-week high close. Bears still have the near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the July high of $20.595 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $19.00. First resistance is seen at Thursday’s high of $20.30 and then at $20.595. Next support is seen at $19.75 and then at Thursday’s low of $19.455. Wyckoff’s Market Rating: 3.0.

September N.Y. copper closed up 965 points at 326.95 cents Thursday. Prices closed nearer the session high and hit a fresh six-week high on heavy short covering and bargain hunting following the strong economic data out of China. Price action Thursday also saw a bullish upside “breakout” from a choppy trading range on the daily bar chart. Copper bulls now have the overall near-term technical advantage. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at the June high of 341.25 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of 303.65 cents. First resistance is seen at Thursday’s high of 327.95 cents and then at 330.00 cents. First support is seen at 325.00 cents and then at 323.40 cents. Wyckoff’s Market Rating: 5.5.