Comex gold futures are trading modestly higher Wednesday morning, on a corrective upside bounce following solid selling pressure on Tuesday, and on some bargain-hunting physical buying and speculative buying in futures that has emerged at the lower price levels. December gold last traded up $4.80 an ounce at $1,166.60. Spot gold was last quoted up $2.20 at $1,164.25.

Gold futures prices hit a fresh three-month low on Tuesday as investor demand for gold has cooled recently. Traders are now seeking out other investment assets, as evidenced by rallies in U.S. and European stock markets. Gold had seen strong safe-haven buying interest in the second quarter of the year, due partly to the European Union's debt crisis prompting traders to sell European currencies and buy gold. However, the Euro currency's recent strength has thwarted those trading strategies. Reports said holdings in SPDR Gold Shares dropped 1.22 metric tons this week, to the lowest level sine early June.

The U.S. stock indexes are trading near unchanged early Wednesday, while the U.S. dollar index is weaker and the Euro currency firmer. Crude oil prices are trading slightly lower. None of these key "outside markets" is providing the gold market with a strong trading direction Wednesday morning.
 
U.S. data due out Wednesday includes durable goods orders.

The London A.M. gold fix was $1,164.00 versus the previous P.M. fixing of $1,168.00.

Technically, December Comex gold futures bears have the solid near-term technical advantage and gained more downside near-term momentum on Tuesday, as several near-term technical levels were breached on the downside. Prices are in a six-week-old downtrend on the daily bar chart.

Importantly, an examination of the longer-term weekly and monthly Comex gold futures charts does not yet reveal any significant chart damage. From a longer-term technical perspective, the current pullback in gold prices is just a downside correction in a longer-term uptrend in prices that is still in place. This fact should assuage, at least for now, the longer-term holders of gold.

For the gold market bulls to begin to regain some fresh upside near-term technical momentum, they will have to push and close December futures prices back above solid chart resistance and psychological resistance at $1,200.00 an ounce. The bears' next downside price objective is producing a close in December gold futures below solid chart support at $1,150.00.

For December gold, shorter-term technical resistance is seen at the overnight high of $1,168.80 and then at $1,175.00. Buy stops likely reside just above those levels. Sell stops likely reside just below chart support at Tuesday's low of $1,160.80 and then at $1,155.00. Today's key near-term Fibonacci pivot level for December gold: $1,160.00.

Comex silver futures are trading slightly lower Wednesday morning, following strong downside pressure seen Tuesday. December silver last traded down 1.7 cents at $17.665 an ounce. Prices are still in a six-week-old downtrend on the daily bar chart and the bears gained some fresh downside technical momentum on Tuesday.

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 last week's high of $18.335 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 July low of  $17.50.

December silver finds shorter-term technical resistance at the overnight high of $17.775 and then at $18.00. Buy stops likely reside just above those levels. Shorter-term technical support for December silver is located at Tuesday's low of $17.65 and then at $17.50. Sell stops are likely placed just below those levels. Today's key Fibonacci pivot level for December silver futures is located at $17.34.

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

Editor’s Note: Meet the Kitco News Team at the upcoming Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration www.kitcoeconf.com.

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