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P.M. Kitco Metals Roundup: Gold in Sharp Sell Off As Bears Reassert Technical Control

Thursday December 12, 2013 2:00 PM

(Kitco News) - Gold prices ended the U.S. day session solidly lower Thursday as technical selling pressure re-emerged due to a lack of fresh, bullish fundamental news. The higher U.S. dollar index Thursday was also a bearish “outside market” factor for the precious metals markets. February gold was last down $31.40 at $1,225.80 an ounce. Spot gold was last quoted down $26.30 at $1226.50. March Comex silver last traded down $0.886 at $19.47 an ounce.

Selling interest in gold Thursday was also partly attributed to the U.S. budget deal reached between congressional Democrats and Republicans this week. The budget agreement is another factor that could work in favor of the U.S. Federal Reserve tapering its monthly bond-buying program sooner. Remember that the last budget impasse and U.S. government shutdown played a part in the Fed holding off on a tapering move.

Traders and investors are looking forward to next week’s meeting (Dec. 17-18) of the U.S. Federal Reserve’s Open Market Committee (FOMC). Recent upbeat U.S. economic data also suggests the Fed might move up its timeline for implementing a tapering of its monthly bond-buying program, also called quantitative easing, including a growing number who think the Fed will announce a tapering at next week’s FOMC meeting. The upshot of this matter is that the market place now expects a tapering—whether it’s in December or in the first quarter. With the market place already factoring in the upcoming tapering, markets’ price reactions are likely to be less dramatic once the tapering is actually announced by the Fed.  

U.S. economic data was a mixed bag Thursday. Weekly jobless claims rose more than expected, but so did the latest monthly retail sales data.

In overnight news, industrial output in the European Union fell sharply in October—down 1.1% from September and the steepest monthly decline in a year. Forecasts were for the number to be up 0.2%. This report is one more argument for the European Central Bank to keep its monetary policy very accommodative. ECB president Mario Draghi on Thursday reiterated his desire to keep the ECB’s easy money policy in place and he also said deflation is not a problem in the EU. However, the fact that Draghi keeps bringing up the deflation matter, amid an extended period of very low inflation in the EU, suggests he is indeed at least a bit worried about it.

The London P.M. gold fix is $1,225.25 versus the previous P.M. fixing of $1,260.75.

Technically, February gold futures prices closed nearer the session low. The gold market bears are back in firm overall technical control and regained downside momentum today. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,267.50. Bears' next near-term downside breakout price objective is closing prices below solid technical support at last week’s low of $1,210.10. First resistance is seen at $1,236.50 and then at $1,250.00. First support is seen at Thursday’s low of $1,222.60 and then at this week’s low of $1,210.10. Wyckoff’s Market Rating: 2.0

March silver futures prices closed near the session low Thursday. Silver bears have the solid overall near-term technical advantage and regained downside momentum Thursday. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $20.48 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $18.89. First resistance is seen at $20.00 and then at $20.25. Next support is seen at Thursday’s low of $19.41 and then at $19.165. Wyckoff's Market Rating: 2.0.

March N.Y. copper closed up 20 points at 329.70 cents Thursday. Prices closed near mid-range and hit a fresh five-week high. Bulls have the near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 336.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 320.00 cents. First resistance is seen at Thursday’s high of 331.05 cents and then at 332.50 cents. First support is seen at Thursday’s low of 328.20 cents and then at 326.85 cents. Wyckoff's Market Rating: 6.0.

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By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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