Gold, silver see price gains on more short covering, bargain hunting

Gold and silver prices are higher in early U.S. trading Monday, with gold notching a three-week high and silver a four-week high. Short covering from futures traders is featured in both metals, with cash market traders also doing some perceived bargain-basement buying after gold prices hit a 15-month low and silver a two-year low in July. October gold futures were last up $7.70 at $1,779.20. September Comex silver futures were last up $0.243 at $20.44 an ounce.

Global stock markets were mostly higher overnight, on this first trading day of August. U.S. stock indexes are pointed toward lower openings when the New York day session beings, on corrective pullbacks and pauses after posting a very good month of July. The U.S. stock indexes are in near-term price uptrends on the daily bar charts amid better trader and investor risk appetite in the marketplace.

In overnight news, China’s official purchasing managers index (PMI) came in at 49.0 in July from 50.2 in June. A reading below 50.0 suggests contraction in the sector. Meantime, the Euro zone July manufacturing PMI was reported at 49.8 versus 52.1 in June.

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The key outside markets today see Nymex crude oil prices down and trading around $96.75 a barrel. Traders are awaiting an OPEC meeting Wednesday. The U.S. dollar index is lower in early U.S. trading, which is also supporting the metals markets. The yield on the 10-year U.S. Treasury note is fetching 2.681%. The 2-year U.S. Treasury note yield is trading at 2.921%, to keep the yield curve inverted.

U.S. economic data due for release Monday includes the U.S. manufacturing PMI, the ISM report on business manufacturing, the global manufacturing PMI, and construction spending.

Technically, the October gold futures bears have the overall near-term technical advantage. However, a price downtrend on the daily bar chart has been negated and prices last Friday saw a bullish weekly high close that is one chart clue that a market bottom is in place. Bulls’ next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the July low of $1,686.30. First resistance is seen at $1,790.00 and then at $1,800.00. First support is seen at the overnight low of $1,764.10 and then at $1,750.00. Wyckoff's Market Rating: 3.0

September silver futures bears have the overall near-term technical advantage. However, a price downtrend on the daily bar chart has been negated and prices last Friday closed at a bullish weekly high close, to suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at $21.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at $20.50 and then at $20.75. Next support is seen at $20.00 and then at last Friday’s low of $19.825. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips