Gold and silver prices retreated for the second consecutive session as last week’s fears over a nuclear conflict with North Korea have abated and as of today the third or fourth story in the news cycle. Also weighing on gold prices was the prospect of another increase in U.S. interest rates, with an influential Federal Reserve official saying on Monday he would support one more rise this year. In economic data today the highlight was the retail sales report for July. Sales came in stronger than expected at up 0.6%. Sales were expected to come in at up 0.4% in July versus down 0.2% in June.
The stronger retail sales reading dropped the gold market to its daily low. This report also falls into the camp of the U.S. monetary policy hawks, who want to see the Federal Reserve raise interest rates again this year. While gold and silver are not significantly overbought, they have clearly added length of the speculative contingent as last week showed five consecutive days of impressive gains.
As of Tuesday August 8th, the COT report showed a net long position of 160,815 contracts. While it's only a weekly increase of 11,000 contracts, the rally late last week showed new speculative longs adding positions ahead of the weekend due to the North Korean situation. As said many times before, bullish metals markets need to be continuously fed bullish news. Without geopolitical headlines this week along with talk of higher interest rates by Fed officials, the market so far has exhibited some back and fill on the charts. Going forward we have the Fed minutes release from their last meeting tomorrow at 1pm central.
Technical levels for both markets come in as follows for the remainder of this week. For December gold, support is down first at 1268.0 and with a close below, the next target is the 100 day moving average at 1256.3. Resistance sits up at 1283.0 and with a close above there, the yearly high at 1298.8 is the next resistance. For September silver, support sits down at 1636.0 and with a close below 1625.2 the next level down. Resistance is up at 1720 and with a close over 1751 is the next level to the upside.