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Precious Metals, Copper Traders Closely Monitoring U.S. Dollar
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Gold futures have backed off recently, from highs scored in November. The rebound in the U.S. dollar and decline in crude oil prices are mainly responsible for gold backing off. Gold will continue to be strongly influenced by the dollar and crude. My bias is that the dollar is close to putting in a major bottom, if it has not already done so. It's also my bias that crude oil has put in at least a near-term market top, if not a major market top. Thus, I can't be too excited about the uspside prospects for gold in the coming weeks.
See on the weekly continuation chart for nearby gold futures that one uptrend line has recently been penetrated on the downside. Also, recent price action on the weekly chart has formed a potentially bearish descending triangle pattern.
However, no serious longer-term technical damage has yet been produced in the gold futures market.
Silver to Continue to Follow Gold
Generally, silver is going to be a follower of its big brother, gold. See on the weekly continuation chart for nearby silver futures that recent price action has penetrated on the downside and negated a longer-term uptrend line. See, too, that the past rallies in silver have petered out around, or just above, longer-term technical resistance at the $15.00 level. A drop in nearby silver futures prices below solid longer-term chart support at the $13.25 level would be significantly longer-term bearish to suggest a major market top is in place.
But at present, no serious longer-term technical damage has yet been produced in the silver futures market.
Keep an Eye on Copper
Veteran traders know that the red industrial metal, copper, can be a leading indicator for the health of the U.S. stock market and the U.S. economy. See on the weekly continuation chart for nearby copper futures that prices are in a longer-term downtrend after posting a bearish triple-top reversal pattern on the weekly chart.
Serious longer-term technical damage has been inflicted in the copper market. A drop below strong technical support at the recent low, as seen on the chart, would produce more serious longer-term chart damage.
Greenback is Key "Outside Market"
Gold, silver and copper futures traders will continue to closely monitor the value of the U.S. dollar versus the other major currencies in the world.
The daily chart for the U.S. dollar index futures shows an impressive recent recovery from the contract and all-time low. And a weekly high close in the U.S. dollar index futures on Friday would be more near-term bullish technical news.
See on the weekly continuation chart for nearby U.S. dollar index futures that bulls still have some more work to do to begin to suggest, from a longer-term technical basis, that a major market low is in place. However, do note that just this week the dollar index has poked above a downtrend line.
Again, my bias is that there is not much left on the downside in the U.S. dollar index. However, a push to a fresh low in the index would be seriously bearish and open the door to another solid leg down in prices in the coming weeks, or longer.
Jim Wyckoff
Senior Market Strategist
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