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Jim Wyckoff A.M. Kitco Metals Roundup: Comex Gold Sees Modest Selling Pressure As EU Debt Crisis Escalates

09 November 2011, 8:00 a.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) - Comex December gold futures prices are modestly lower in early U.S. trading Wednesday. It’s a “risk-off” day in the market place so far Wednesday as European and U.S. stock markets have sold off sharply amid an escalation in the European Union sovereign debt crisis. Despite being a safe-haven asset, the gold market is succumbing to the selling pressure seen across the commodity market spectrum so far Wednesday. Some profit-taking pressure from recent solid price gains is also occurring in the precious yellow metal. December gold last traded down $6.00 at $1,793.20 an ounce. Spot gold last traded up $7.00 an ounce at $1,792.50. December Comex silver last traded down $0.378 at $34.775 an ounce.

The European Union financial and sovereign debt crisis has been ratcheted up several notches Wednesday as Italian government bond yields have pushed above the critical 7% level, which calls into question Italy’s ability to service its debt. (As if such was not already in question by the market place!) Italy’s prime minister resigned Tuesday. On top of all this, the Greek government is in disarray. This is making for a keen “risk-off” day in the market place Wednesday. While not evident Wednesday morning for gold and silver, the heightened uncertainty remains an overall bullish underlying factor for the precious metals markets, and especially gold.

It would not be surprising to see bargain-hunting buying interest surface soon in gold soon, as traders “buy the dip.”

The U.S. dollar index is trading sharply higher Wednesday morning, on perceived safe-haven demand for the greenback and U.S. Treasuries, amid the EU debt crisis escalation.
The dollar index bulls have gained some upside near-term technical momentum recently. Crude oil prices are lower Wednesday morning, along with most other commodity markets, and that’s a bearish underlying bullish “outside market” force for the precious metals. Crude oil prices remain in a near-term uptrend, however.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey and the weekly DOE petroleum stocks report.

The London A.M. gold fixing was $1,780.00 versus the previous P.M. fixing of $1,795.00.

Technically, December gold bulls still have the solid overall near-term technical advantage. Prices are in a six-week-old uptrend on the daily bar chart and hit a fresh six-week high Tuesday. Bulls' next upside technical objective is to produce a close above psychological resistance at $1,800.00, which could easily occur Wednesday. Bears' next near-term downside price objective is closing prices below psychological support at $1,700.00. First resistance is seen at Tuesday’s high of $1,804.40 and then at $1,825.00. First support is seen at the overnight low of $1,778.80 and then at this week’s low of $1,754.00.

December silver futures bulls still have the overall near-term technical advantage. A six-week-old uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is producing a close above technical resistance at the October high of $35.70 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $32.105. First resistance is seen at this week’s high of $35.35 and then at $35.70. Next support is seen at the overnight low of $34.29 and then at $34.00.

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By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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