On Monday, gold prices ended the trading session with good gains. In electronic trading on Tuesday, the metal continues advancing.
Gold for August delivery added $18.40, or 0.5%, to $1,253.30, adding to Monday’s gain of $22.20, or 1.8%, on the Comex division of the New York Mercantile Exchange.
The main reasons for traders’ renewed interest in the yellow metal is the current low price coupled with safe-haven demand.
There has been a significant escalation in violence in Egypt, Syria and Lebanon during the past two days. There are concerns the violence will escalate in Egypt in the coming days. Gold is seeing some safe-haven demand on the latest crisis in Egypt.
In addition, gold prices found support after the Chinese government said yesterday its consumer price index rose 2.7% in June from the year-ago period. The reading was above economists’ expectations. Gold is widely seen as an inflation hedge and store of value, and rising inflation in China comes at a time of largely subdued inflation in the U.S. and other countries worldwide.
The U.S. dollar index was weaker Monday, although trading in the green territory on Tuesday, on some profit taking after prices hit a three-year high last Friday. The weaker greenback Monday was a bit supportive for the precious metals markets. However, the overall strong technical posture of the dollar index remains a major bearish underlying factor for the metals.
There are mixed reports on Asian demand for physical gold recently. Some are saying it’s picking up at the lower world price levels, but others say it’s still not considered strong. The Indian government has worked recently to squelch its consumer demand for imported gold.
Technically, August gold futures prices closed near the session high Monday. The gold bears still have the solid overall near-term technical advantage. Gold prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,267.00. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at the June low of $1,179.40. First resistance is seen at $1,250.00 and then at $1,260.00. First support is seen at $1,225.00 and then at Monday’s low of $1,214.40.