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Wednesday November 28, 2012 1:53 PM
Gold prices ended the U.S. day session sharply lower Wednesday, but up from the daily low. Just after the Comex gold futures market opened at 8:20 a.m. eastern time Wednesday heavy sell orders flooded in and prices quickly dropped by over $20 an ounce, to extend earlier losses and hit the daily low. Technical selling, including stop-loss orders being triggered, and options-related selling pressure likely exacerbated the steep and rapid downturn in gold prices. Some reports said there were heavy put options purchases seen in the market Tuesday. Reports also said sell orders of over 7,500 futures contracts (worth 100 ounces each) were executed right at the opening of Comex futures trading Wednesday. There was no major news event which occurred during or near that timeframe to explain the sudden downdraft in prices. Silver futures followed gold’s lead and also sold off sharply. Silver by the close Wednesday did post a good recovery from its daily low.
February gold last traded down $26.00 at $1,718.80 an ounce. Spot gold was last quoted down $25.20 at $1,717.25. March Comex silver last traded down $0.349 at $33.725 an ounce.
Importantly, no significant near-term chart damage was inflicted in gold or silver markets Wednesday. However, Wednesday’s price action did see the gold and silver bulls’ technical strength fade a bit and the bulls now need to step up and show fresh power soon in order to avoid near-term chart damage being inflicted.
The early part of the trading day Wednesday saw a “risk-off” trader and investor mentality in the market place, with gold and silver on this day choosing to act more like a raw commodity (risk asset) than like a safe-haven asset. Traders and investors are more keenly focused on the negotiations among U.S. lawmakers and President Obama regarding the so-called “fiscal cliff” tax increases and spending cuts that are approaching. Rhetoric coming from all U.S. lawmakers earlier this week was not soothing to the market place—highlighted by Senate Majority Leader Harry Reid, who said late Tuesday there had been scant progress made in the negotiating process to resolve the matter. However, more conciliatory words came from U.S. lawmakers Wednesday, which did somewhat assuage the markets, as the U.S. stock indexes pushed into positive territory after starting the day lower.
European and Asian stock markets, and the Euro currency were weaker overnight on the fiscal cliff worries. There is still a sense among many veteran politicos and market watchers that some type of deal will be reached soon to avoid the U.S. government going over the fiscal cliff.
Meantime, in the Middle East there are growing tensions in Egypt, as its president awarded himself major powers last week, and the public did not like it. Protesting in the streets is occurring this week. This situation bears close watching and if it escalates, it will more significantly impact markets.
The U.S. dollar index was modestly higher earlier Wednesday but then sold off when the U.S. stock market came off its daily lows on the more conciliatory rhetoric on the fiscal cliff matter coming out of Washington, D.C. The dollar index weakening also allowed gold and silver prices to move up from their daily lows. Meantime, Nymex crude oil prices were lower Wednesday. The crude oil bears still have the overall near-term technical advantage and gained some fresh downside momentum on Wednesday.
These two key “outside markets” will continue to impact the precious metals markets on a daily basis.
The London P.M. gold fixing was $1,708.00 versus the previous P.M. fixing of $1,746.25.
Technically, February gold futures prices closed nearer the session low Wednesday. A three-week-old uptrend line on the daily bar chart was negated. While no serious chart damage was inflicted Wednesday, the bulls have faded, technically, and need to step up and show fresh power soon. Gold bulls still have the overall near-term technical advantage. The gold bulls’ next upside price breakout objective is to produce a close above solid technical resistance at the November high of $1,757.10. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,700.00. First resistance is seen at $1,730.00 and then at $1,740.00. First support is seen at Wednesday’s low of $1,707.90 and then at $1,700.00. Wyckoff’s Market Rating: 6.0
March silver futures prices closed nearer the session high Wednesday. A three-week-old uptrend is still in place on the daily bar chart and silver bulls have the overall near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October high of $35.51 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $32.50. First resistance is seen at Wednesday’s high of $34.13 and then at this week’s high of $34.37. Next support is seen at $33.50 and then at $33.00. Wyckoff's Market Rating: 6.5.
March N.Y. copper closed down 190 points at 353.20 cents Wednesday. Prices closed nearer the session high. Copper bears still have the overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 360.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the November low of 341.45 cents. First resistance is seen at Wednesday’s high of 355.25 cents and then at the November high of 357.65 cents. First support is seen at 350.00 cents and then at 348.25 cents. Wyckoff's Market Rating: 4.0.
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By Jim Wyckoff, contributing to Kitco News; firstname.lastname@example.org