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A.M. Kitco Metals Roundup: Gold Solidly Lower, Hits 5-Week Low, on Fresh Technical Selling

Monday February 11, 2013 8:32 AM

(Kitco News) - Gold prices are trading sharply lower in the early going Monday, hitting a fresh five-week low, on fresh technical selling pressure. April Comex futures prices dropped back below the key 200-day moving average and fell below important near-term chart support that triggered sell stop orders. April gold last traded down $17.30 at $1,649.50 an ounce. Spot gold was last quoted down $18.50 at $1,649.25.  March Comex silver last traded down $0.47 at $30.97 an ounce.

Most Asian markets were closed Monday for the Lunar New Year celebration. China is on holiday all week for the Lunar New Year. That may be slightly bearish for the gold market as it could limit physical buying interest this week, due to demand from China slowing during its holiday season.

Later this week the Group of 20 nations meets in Moscow. A main topic will be currency values as many industrialized nations have in recent months, or longer, worked to devalue their currencies to revive their economic growth. There is growing concern that “currency wars” could break out if there is not some form of agreement reached soon by the major nations. At present, Japan is seen as the major instigator as the yen continues to plummet in value. Reports during the weekend said the U.S. and European Union finance officials are considering issuing a joint statement on the matter, designed to ease growing worries and to send a warning to other countries. If the major countries cannot come to meaningful agreement on the matter and continue to work to devalue their currencies, that could become a major bullish force for the gold market, which is viewed by many traders and investors worldwide as a safe-haven “hard currency.”

In other news, the OECD said in a report Monday that the European Union debt crisis is stabilizing amid Euro zone economic improvement. The group also said there will be economic growth divergence in the near future, with the U.S., U.K., Japan and Brazil showing economic growth, while China, Canada, France and India are set for economic weakness in the coming months.

The U.S. dollar index is firmer early Monday but did hit a fresh four-week high overnight. The greenback bulls have gained some fresh upside near-term technical momentum recently, but the bears still have the overall near-term technical advantage. Meantime, Nymex crude oil futures prices are slightly lower early Monday. The crude oil bulls still have the overall near-term technical advantage. The bullish near-term technical posture in crude oil is a supportive underlying element for the precious metals.

There is no major U.S. economic data due for release Monday.

The London A.M. gold fixing is $1,663.50 versus the previous London P.M. fixing of $1,668.25.

Technically, April gold futures bears have regained the slight near-term technical advantage. Prices have dropped below the key 200-day moving average, which on Monday is located at $1,670.00. Prices also dropped below solid chart support at the $1,653.20 level, which triggered fresh sell stop orders. The gold bulls’ next upside price breakout objective is to produce a close above solid technical resistance at the February high of $1,687.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the January low of $1,627.90. First resistance is seen at $1,653.20 and then at $1,660.00. First support is seen at the overnight low of $1,645.50 and then at $1,640.00.

March silver futures bulls and bears are on a level near-term technical playing field but the bulls are now fading. Prices are still holding just above the key 200-day moving average, which comes in Monday at $30.76. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the January high of $32.485 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $30.745. First resistance is seen at the overnight high of $31.535 and then at Friday’s high of $31.695. Next support is seen at $30.745 and then at $30.50.

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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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