Thursday December 13, 2012 8:21 AM
(Kitco News) - Comex gold futures prices are trading solidly lower Thursday morning, on some fresh technically based selling and on mildly bearish outside market forces. Once again, the gold market suffered a rapid and inexplicable price drop in early Asian trading Thursday, on reported sell stops being triggered. Sell stops are pre-placed market orders to sell if a certain price is hit. That marks the third week in a row of such price declines that occur for seemingly no fundamental reason. The market place is still digesting the outcome of the U.S. Federal Reserve FOMC meeting that ended Wednesday afternoon. February gold last traded down $23.40 an ounce at $1,694.50. Spot gold was last quoted down $18.10 at $1,694.00. March Comex silver last traded down $0.967 at $32.82 an ounce.
Attention of the market place has shifted to once again focus on the U.S. “fiscal cliff” tax increases and spending cuts that is fast approaching. There is no apparent movement from either side on the matter, just more rhetoric from politicians. The market is a bit more on edge Thursday after Fed Chairman Bernanke on Wednesday warned that the U.S. Fed could do little to repair the damage from the politicians failing to come to agreement and the government going over the fiscal cliff. The market place had been reckoning odds were a bit higher than not that there would be a last-minute agreement among U.S. lawmakers to avoid the fiscal cliff. However, the lack of progress between the Obama administration and Congress as the year winds down is making traders very skittish. The overall situation continues to be a bearish drag on many markets, including the raw commodities and stock markets.
The market place is still digesting the U.S. Federal Reserve decision Wednesday to end its “Operation Twist” program but extend its long-bond-buying program to the tune of $45 billion a month. That news is what many had figured the central bank would do. The new plan would expand the Fed’s balance sheet and ostensibly print greenbacks. The FOMC also said it will begin tying interest rate policy to the U.S. unemployment rate, saying as long as unemployment is above 6.5%, rates will not rise. Some quick math on that matter suggests the Fed will not be raising interest rates for at least three more years. Wednesday’s Federal Reserve developments are a bullish underlying fundamental factor for the raw commodity markets, due to the inflationary implications.
In overnight news, European Union finance officials have agreed on a deal that would create a single bank supervisor and EU banking union. This is a big, positive step for the EU in its three-year-old sovereign debt crisis. The news lifted the Euro currency and lowered Spanish and Italian bond yields. The agreement still needs to be ratified by the European Parliament. Also Thursday Greece was approved to get a fresh tranche of EU bailout money. All in all Thursday was a very positive day in the European Union’s efforts at fixing its financial and economic problems. However, much more heavy lifting needs to occur in the coming months for the EU to continue on a path of recovery.
The U.S. dollar index is slightly higher Thursday morning, on some short covering. The greenback bulls have faded, technically, recently. Nymex crude oil futures prices are slightly lower Thursday. The crude oil bulls have faded a bit. These two key “outside markets” are in a modestly bearish posture for the precious metals Thursday morning and will continue to impact the precious metals markets on a daily basis.
U.S. economic reports due for release Thursday include the weekly jobless claims report, the producer price index, retail sales, and manufacturing and trade inventories.
The London A.M. gold fixing is $1,694.75 versus the previous London P.M. fixing of $1,716.25.
Technically, gold futures bulls still have the slight overall near-term technical advantage but have faded recently and need to show more power soon to keep their technical edge and avoid fresh near-term chart damage. The gold bulls’ next upside price breakout objective is to produce a close in February futures above solid chart resistance at the November high of $1,757.10. Bears' next near-term downside price breakout objective is closing prices below solid chart support at the November low of $1,674.70. First resistance is seen at $1,700.00 and then at the overnight high of $1,712.80. First support is seen at Thursday’s low of $1,692.10 and then at the December low of $1,684.10.
March silver futures bulls have the overall near-term technical advantage, but trading this week has turned choppy. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the November high of $34.49 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 $33.00 and then at today’s high of $33.52. Next support is seen at the December low of $32.585 and then at $32.50.
Follow me on Twitter to immediately get the very latest market developments. If you are not on board, then you are not getting key analysis and perspective as fast or as often as you could! Follow me on Twitter to get my very timely intra-day and after-hours briefs on precious metals price action. The precious markets will remain very active. If you want market analysis fast, and in after-hours trading, then follow my up-to-the-second precious metals market perspective on Twitter. It's free, too. My account is @jimwyckoff.
By Jim Wyckoff, contributing to Kitco News; email@example.com