Gold prices are modestly lower in early U.S. trading Tuesday, on a corrective pullback from good gains scored Friday and Monday. The rally in the Euro currency and the slumping U.S. dollar index on Tuesday are helping to limit selling pressure in gold and silver. June gold was last down $2.30 at $1,307.00 an ounce. Spot gold was last quoted down $3.40 at $1,306.75. July Comex silver last traded up $0.054 at $19.625 an ounce.

In overnight news, the Euro currency rose to a nearly two-month high against the flagging U.S. dollar following some positive economic reports coming out of the European Union. The Markit purchasing managers index (PMI) rose to 54.0 in April from 53.1 in March. A reading above 50.0 suggests expansion in the sector. Spain and Italy showed very upbeat PMI numbers. Meantime, EU retail sales rose 0.3% in the latest month. However, EU data once again showed businesses’ selling prices dropped for the 25th straight month. This month’s monetary policy meeting of the European Central Bank, on Thursday, will be closely monitored as the ECB is feeling pressure to add further stimulus measures due to worries about deflation. The OECD said Tuesday the ECB should cut its main interest rate to ward off deflationary price pressure. An ECB rate cut would be an underlying bullish factor for the gold market.

Meantime, the U.S. dollar index fell to a six-month low overnight. The greenback bears are in firm near-term technical command, which suggests more price weakness to come.

The Russia-Ukraine tensions are still high, although there were no major developments overnight. Gold and U.S. Treasuries have seen safe-haven buying amid the heightened Russia-Ukraine conflict. This matter is not going away soon and will likely see an escalation in tensions. Such will also limit selling pressure in the gold market.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the U.S. trade report, the IDB/TIPP economic optimism index, and the ISM semiannual business report.

Wyckoff’s Daily Risk Rating: 7.0 (The Russia-Ukraine tensions are elevated.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,308.50 versus the previous P.M. fixing of $1,281.25.

Technically, June gold futures bears have the slight overall near-term technical advantage but the bulls still have some momentum on their side to suggest a near-term market low is in place. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the April high of $1,331.40. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the April low of $1,268.40. First resistance is seen at Monday’s high of $1,315.80 and then at $1,320.00. First support is seen at $1,300.00 and then at $1,290.00.  

July silver futures bears have the solid overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $18.685. First resistance is seen at Monday’s high of $19.745 and then at $20.00. Next support is seen at Monday’s low of $19.485 and then at $19.25.

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