Gold prices are modestly higher in early U.S. trading Tuesday, on a mild short-covering rebound and a bit of perceived bargain basement buying after hitting a four-month low Monday. Bears still have the firm overall technical advantage in both gold and silver markets. A heavy slate of worldwide economic data this week is likely to impact the markets. August Comex gold was last up $2.90 at $1,247.00 an ounce. Spot gold was last quoted up $2.50 at $1,246.50. July Comex silver last traded up $0.131 at $18.87 an ounce.

In overnight news the rate of consumer price inflation in the European Union was up 0.5%, year-on-year, in May. That was the lowest reading in four years. A figure of up 0.7% was expected by the market place. The European Central Bank wants a 2.0% annual inflation figure and this latest inflation report is still more evidence that deflation could become a problem for the EU. Unemployment in the EU was also reported Tuesday, coming in at 11.7% in April from 11.8% in March. Thursday’s monthly monetary policy meeting of the ECB is widely believed to see the bank announcing further monetary policy stimulus measures. Recent weak European Union economic data and fears of deflation setting in for the EU are solid reasons for the ECB to make a move next week. Such would be another bearish below to the Euro currency.

The gold market is closely watching the Thursday ECB meeting results, which could be a mixed bag for gold. Printing more Euros is likely to further deflate the common currency, which in turn would likely be bearish for the Euro. The U.S. dollar would likely also benefit from any drop in the Euro currency, which in turn would be bearish for gold. However, stimulative monetary measures from the world’s major central banks have in recent years been bullish for raw commodities, including the precious metals. My bias is that if the Euro does see selling pressure and the dollar index rises following the ECB meeting, such would send gold prices lower. But it could be that the markets have already factored into their price structures an ECB stimulus move and there could be little reaction to such a move. It’s also my bias that gold is going to need a fresh geopolitical flare-up or significantly downbeat U.S. economic news to bring the yellow metal out of its present price slump.

The big U.S. data point of a busy data week is Friday’s Labor Department employment situation report for May. The early forecast is for non-farm payrolls to have increased 215,000 in the report.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the ISM New York report on business, manufacturers’ shipments and inventories, the IBD/TIPP economic optimism index, the global manufacturing PMI, and domestic auto sales.

Wyckoff’s Daily Risk Rating: 5.5 (The Russia-Ukraine crisis has not escalated and the rest of the world is quieter regarding geopolitics.)

(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 $1,244.25 versus the previous P.M. fixing of $1,247.25.

Technically, August gold futures bears have the firm near-term technical advantage. A 10-week-old downtrend line is in place on the daily bar chart. However, the market is short-term oversold and due for at least an upside corrective bounce very soon. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,268.50. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,220.00. First resistance is seen at Monday’s high of $1,251.00 and then at $1,260.60. First support is seen at Monday’s low of $1,241.10 and then at $1,235.00.  

July silver futures bears have the solid overall near-term technical advantage after prices last Friday hit a contract low. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $19.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $18.00. First resistance is seen at $19.00 and then at $19.155. Next support is seen at the overnight low of $18.735 and then at the contract low of $18.615 and then at $18.50.

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