Gold, silver see price gains on bullish outside mkts, inflation concerns

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(Wallace Refiners) – Gold and silver prices are modestly higher in early morning U.S. trading Tuesday, with gold scoring a five-month high. Bullish outside markets to start the U.S. trading week are helping out the precious metals market bulls—a lower U.S. dollar index and higher crude oil prices. The technical postures for both metals remain fully bullish. August gold futures were last up $5.80 at $1,909.80 and July Comex silver was last up $0.431 at $28.45 an ounce.

Gold prices are also boosted as traders seek out the metal has a hedge against rising inflationary pressures. Reports said gold exchange traded funds (ETF’s) have seen more money flow into them the past few weeks.

Global stock markets were mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Trader and investor risk appetite remains keener to start the month of June, amid notions the Federal Reserve may have been right in its proclamations that rising inflation will only be transitory.

Bloomberg reported hedge-fund managers have reduced their holdings in 20 out of 23 commodities, due in part to recent milder and wetter weather in the U.S. that is raising the prospects for larger harvests of grains. China’s government’s recent remarks on futures markets speculation, along with new regulations limiting the sale of futures to individual investors, have also taken some of the bullish fervor out of the raw commodity sector.

In other overnight news, China’s official manufacturing purchasing managers index (PMI) was reported at 51.0 in May from 51.1 in April. A reading above 50.0 suggests growth in the sector. Reports out of China say domestic manufacturers have stopped accepting new orders for products, or are evening considering shutting down, due to rising material costs.

The Euro zone consumer price index for May came in at up 2.0%, year-on-year, versus the rise of 1.6% seen in April. The May CPI was just above trader expectations.

The key outside markets today see the U.S. dollar index weaker. Nymex crude oil prices are solidly higher and hit a 2.5-year high, trading around $68.00 a barrel. An OPEC meeting Tuesday is in focus for oil traders. The cartel is expected to slightly increase its collective production. The yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.62%.

U.S. economic data due for release Tuesday includes the U.S. manufacturing PMI, the ISM report on business manufacturing, the IDB/TIPP economic optimism index, construction spending, the global manufacturing PMI, and the Texas manufacturing outlook survey.

Technically, August gold futures bulls have the solid overall near-term technical advantage amid a two-month-old price uptrend in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the January high of $1,971.50. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at the overnight high of $1,919.20 and then at $1,925.00. First support is seen at the overnight low of $1,904.80 and then at $1,900.00. Wyckoff’s Market Rating: 7.5

The silver bulls have the solid overall near-term technical advantage amid a two-month-old price uptrend in place on the daily bar chart. Silver bulls’ next upside price objective is closing July futures prices above solid technical resistance at $30.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $27.00. First resistance is seen at the overnight high of $28.52 and then at the May high of $28.90. Next support is seen at $28.00 and then at last week’s low of $27.48. Wyckoff’s Market Rating: 7.0.