Soft Data Supportive of Precious Metals

Last week both gold and silver experienced a key reversal in which the bearish market sentiment was slowly replaced with bullish sentiment. A combination of economic data, as well as the semi annual monetary report and testimony given by the Federal Reserve's Chairwoman Janet Yellen, have been cited as primary causes for the recent price advance. These events set into motion a continuation of downside pressure on the US dollar and a key reversal resulting in an upward price move in both gold and silver.

Last week’s key reversal in both gold and silver began slowly, like a freight train building up speed as it leaves the station, building momentum and speed slowly over time.

During the first part of last week, both gold and silver prices rose for the first three consecutive days, resulting in small daily gains in both gold and silver. On Thursday traders witnessed a small price decline, followed by a strong upside spike in pricing on Friday.

Given the slow and methodical way both gold and silver pricing began to rise last week, Friday’s dramatic upside move was a clear indication that market sentiment had shifted and a key reversal was in play.

Today traders and investors witnessed both gold and silver pricing continuing to rise, as the momentum from last week resulted in follow-through buying today. Gold futures basis with the most active August contract settled up $6.60 to close at $1234.10, a gain of just over a half a percent. Silver was able to close above $16 gaining over a full percent on the day.

Gold Trades Through Its 200-Day Moving Average

On a technical basis, today’s price move in gold above its 200-day moving average is significant. Given the recent price advance, our current numbers indicate strong technical support at approximately $1224 per ounce, with the 200-day moving average at $1233 pointing to the next level of price support.

In an interview with MarketWatch, Carsten Fritsch, part of the commodities team at Commerzbank said Monday’s climb lifted the yellow metal above “the technically important 200-day moving average at $1,230 an ounce. If it were to rise above this level in any lasting fashion, we could see technical follow-up buying,”

Our studies also indicate current levels of resistance are at $1240 which is a 61.8% retracement of the recent correction, and then at $1247.50 which is the current level in which the 50-day moving average resides.

Wishing you as always, good trading,