By: Jim Wyckoff
August 28, 2013
Gold prices are modestly higher in early U.S. trading Wednesday and hit a fresh 3.5-month high overnight. More safe-haven investor demand and technically related buying are featured. December Comex gold was last up $4.40 at $1,424.60 an ounce. Spot gold was last quoted up $8.20 at $1424.75. September Comex silver last traded up $0.119 at $24.775 an ounce.
Gold prices are now up around 20% from the June low, which was a nearly three-year low. A long-time general gauge of a market entering bullish territory is when its price moves up by 20% from its last major low.
As the U.S. appears poised to take military action against Syria after its government regime used chemical weapons against its citizens, the market place is extra nervous. Such has favored safe-haven assets such as gold and U.S. Treasuries. Crude oil prices have also risen sharply recently, on worries about disruptions to oil exports from the Middle East.
Asian and European stock markets were again under pressure Wednesday on the Syria tensions. The U.S. stock indexes were trading near steady in electronic trading before the opens.
There are worries any U.S. military intervention in Syria could escalate into further instability and violence in the already volatile Middle East. Specifically, the market place wonders what the Syrian regime will do after it’s been hit with U.S. missiles. Will it attack Israel? Will it use more chemical weapons? Will Iran get involved? There is an old saying that the first thing that goes out the window during a major military operation is the original plan.
The key “outside markets” are in a neutral daily posture for the precious metals markets Wednesday morning. The U.S. dollar index is firmer on more short covering and some safe-haven demand, which is mildly bearish for the precious metals. The greenback still bears have the overall near-term chart advantage. Meantime, Nymex crude oil futures prices are sharply higher early Tuesday and are well above $110 a barrel. The crude oil bulls have the solid overall near-term technical advantage.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage application survey, pending home sales and the weekly DOE energy stocks report.
The London A.M. gold fix is $1,425.50 versus the previous P.M. fixing of $1,419.25.
Technically, December gold futures bulls have the near-term technical advantage and are gaining upside momentum. Prices hit a 3.5-month high overnight. A two-month-old uptrend is in place on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,450.00. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at $1,384.00. First resistance is seen at the overnight high of $1,434.00 and then at $1,440.00. First support is seen at the overnight low of $1,413.20 and then at $1,400.00.
September silver futures bulls have the overall near-term technical advantage. Prices hit a 4.5-month high overnight. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $26.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $23.605. First resistance is seen at the overnight high of $25.12 and then at $25.50. Next support is seen at the overnight low of $24.465 and then at Tuesday’s low of $23.98.