(Kitco News) –Gold prices are modestly lower in early U.S. trading Tuesday, on a downside correction after poking to a five-week high in overnight trading. A slightly higher U.S. dollar index Tuesday is also a bit bearish for the precious metals markets on this day. February Comex gold was last down $3.30 an ounce at $1,181.60. March Comex silver was last down $0.068 at $16.615 an ounce.
Reports overnight said demand for physical gold from China is picking up ahead of the Chinese lunar new year. There has also been a pick-up in demand for gold-backed exchange-traded-funds early in 2017.
The world marketplace is anxiously awaiting President-Elect Donald Trump’s first press conference since his election, on Wednesday. Already, Trump’s Twitter tweets have unsettled stocks and stock sectors. The marketplace perceives that Trump wants better relations with Russia, but may take a hard line on relations with China.
In overnight news, China saw a sharp rise in its inflation rate, as its producer prices were up 5.5% in December, year-on-year, and up 3.3% from November. The rise in China’s inflation rate underscores a theme of rising inflation (although not yet problematic) in many industrialized countries. Rising inflation is a positive element for the precious metals market bulls.
The key “outside markets” on Tuesday morning see the U.S. dollar index trading slightly lower. The greenback bulls still have the firm overall technical advantage despite some choppy trading action the past week. The other outside market finds Nymex crude oil prices trading modestly higher after suffering sharp losses on Monday. Growing U.S. oil rig counts and news that Libya is ramping up its oil production are weighing on crude oil prices early this week. Nymex Crude oil finds strong overhead resistance at or near the recent high of $55.44 in February futures.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the NFIB small business index, monthly wholesale trade, the IBD/TIPP economic optimism index, and the World Bank’s global economic prospects report.
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Technically, February gold futures bears still have the overall near-term technical advantage but the bulls have some upside momentum. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,200.00. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at the December low of $1,124.30. First resistance is seen at the overnight high of $1,187.70 and then at $1,195.00. First support is seen at Monday’s low of 1,172.20 and then at $1,163.60. Wyckoff’s Market Rating: 3.5
March silver bears have the overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing futures prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the December low of $15.675. First resistance is at last week’s high of $16.76 and then at $17.00. Next support is seen at Monday’s low of $16.455 and then at $16.26. Wyckoff’s Market Rating: 3.0.
By Jim Wyckoff, contributing to Kitco News; [email protected]