A.M. Kitco Metals Roundup: Comex Gold Futures Lower on Profit Taking as U.S. Dollar Shows Strength

20 August 2010, 8:10 a.m.
By Jim Wyckoff
Of Kitco News

Comex gold futures prices are trading lower Friday morning, as the market experiences a corrective, profit-taking pullback from recent gains. A stronger U.S. dollar index is also weighing on gold early Friday. December gold last traded down $5.20 an ounce at $1,230.20. Spot gold was last quoted down $3.90 at $1,229.00.

Gold has seen an impressive runup from the late-July low, having tacked on around $75.00 an ounce to produce a solid three-week-old uptrend. Some profit-taking pressure is not unexpected and don't be surprised if some bargain-hunting buyers do step in to buy the dip in prices.

Gold has seen some safe-haven buying interest re-emerge this week as U.S. economic data this week has been generally weaker than expected. There are no major U.S. economic reports due out Friday.

The U.S. dollar index is trading higher Friday morning and is poised to produce a bullish weekly high close Friday. If the greenback continues to rally, that could limit the upside in the gold market. However, recent history has shown the U.S. currency and gold can both rally at the same time, due to both assets being viewed by investors as safe-haven entities.

Crude oil prices and stock indexes are trading weaker Friday morning. These two key "outside markets" are suggesting investor risk appetite is back-pedaling, which is an underlying positive for the gold market. Bolstering this notion is the fact that U.S. Treasury bonds scored new contract highs overnight, as investors continue to be willing to park their money for long periods of time for a minimal return.

The London A.M. gold fix was $1,230.50 versus the previous P.M. fixing of $1,233.50.

Technically, the gold market bulls still have some near-term upside technical momentum. Prices are in a solid three-week-old uptrend on the daily bar chart. The longer-term charts also still fully favor the gold market bulls.

The next near-term upside price objective for the gold market bulls is to push and close December futures prices above solid chart resistance at $1,250.00. The bears' next near-term downside price objective is producing a close in December gold futures below solid chart support at $1,200.00.

For December gold, shorter-term technical resistance is located at this week's high of $1,239.50 and then at $1,250.00. Buy stops likely reside just above those levels. Sell stops likely reside just below chart support at the overnight low of $1,229.60 and then at $1,224.30. Today's key near-term Fibonacci pivot level for December gold: $1,228.00.

Comex silver futures are weaker Friday morning. December silver last traded down 7.4 cents at $18.305 an ounce.  Trading has been choppy in silver recently.

The next near-term upside price objective for the silver market bulls is to push and close December Comex futures prices above solid chart resistance at the August high of $18.75 an ounce. The next downside price objective for the silver bears is to push and close December silver prices below solid technical support at the August low of $17.855.

December silver finds shorter-term technical resistance at today's high of $18.395 and then at $18.50. Buy stops likely reside just above those levels. Shorter-term technical support for December silver is located at the overnight low of $18.185 and then at $18.00. Sell stops are likely placed just below those levels. Today's key Fibonacci pivot level for December silver futures is located at $18.24.


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

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