Gold prices halted their recent slide albeit by the smallest of margins Wednesday gaining a whopping $2.40 in value to close at 1245.8 basis August futures. There seemed to be a reluctance of selling at the 1240 level along with technical chart consolidation after prices hit a four-week low early on. Mostly weaker world stock indices today worked in favor of the gold market bulls.
Global equity markets were mostly lower Wednesday due in part to falling crude oil prices and lower world government bond market yields. Slumping oil prices and lower bond yields suggest inflationary price pressures will remain weak. While weaker stock markets on this day were a friendly for gold, the anticipation of very low inflation longer term is an underlying bearish factor for the precious metals sector.
Outside markets such as crude oil futures continue to trade lower and hit a 14-month low today. The oil market bears have the technical advantage as prices are trading below $43.00 a barrel. Another negative for gold has been the near term bounce in the dollar as greenback bulls have gained some upside momentum as prices hit a four-week high on Tuesday.
The problem as I see it for any major upside for gold is the deflationary overtone in the market following last week’s Fed meeting and announcement. Janet Yellen in post meeting commentary last week eschewed the Fed’s two percent inflation target. She focused the Fed’s near term goals as unwinding their massive balance sheet while returning to a normal rate policy rather that the accomodative levels of short term rates under two percent the market has become accustomed to since the recession. The hawkish views emanating from the FOMC has given the dollar a bid while giving a significant downside washout to the energy and metals sector.
Technical’s come in as follows for both August gold and July silver for the remainder of this week. For August gold, support comes in at 1244.6 and with a close under 1232.9 is next. Resistance sits up at 1264.4 and up at 1276.1. For July silver, support is down at 1615.6 and then down at 1592.0. Resistance is up at 1688.1 and then up at 1714.2.