Comex gold futures prices are trading slightly higher Friday morning, on a corrective short-covering bounce from recent losses. Traders are awaiting key U.S. economic data due out Friday morning: the second-quarter gross domestic product report. That report is expected to show a 2.5% growth rate. A stronger-than-expected reading would likely be bearish for the gold market, as investor risk appetite would likely uptick.  December gold last traded up $1.90 an ounce at $1,173.10. Spot gold was last quoted up $3.60 at $1,170.50.

Friday is the last trading day of the week and of the month, which could make for a more active trading session as some end-of-the-month book-squaring is likely by investment firms.

Reports continue to say demand for physical gold is good at the present lower price levels, which is keeping a price floor under the market, at least for now.  Wire service reports overnight said SPDR Gold Shares holdings were near unchanged on Thursday, but down 3% this month.

Gold futures prices on Wednesday hit a fresh three-month low of $1,159.30, basis December Comex futures, and have seen quieter trading action and a pause since then. This pause does not favor the gold market bulls.

The U.S. stock indexes are trading weaker early Friday, while crude oil prices are also weaker. The U.S. dollar index is slightly higher early. These key "outside markets" could also be impacted by Friday morning's U.S. GDP report. The overall recent postures of the commodity markets and the U.S. and European stock markets does suggest investor risk appetite is increasing, which is an underlying bearish factor for gold, as it takes away safe-haven investment demand for the yellow metal.
 
The London A.M. gold fix was $1,168.00 versus the previous P.M. fixing of $1,162.50.

Technically, December Comex gold futures bears still have the overall near-term technical advantage. Prices are still in a six-week-old downtrend on the daily bar chart.

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 $1,178.80 and then at $1,188.00. Buy stops likely reside just above those levels. Sell stops likely reside just below chart support at the overnight low of $1,168.00 and then at this week's low of $1,159.30. Today's key near-term Fibonacci pivot level for December gold: $1,160.00.

Comex silver futures are trading slightly higher Friday morning, on some mild short covering. December silver last traded up 3.7 cents at $17.705 an ounce. Prices are still in a six-week-old downtrend on the daily bar chart and the bears have the overall near-term technical advantage. A minor bearish pennant pattern has formed on the daily bar chart.

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 June low of  $17.335.

December silver finds shorter-term technical resistance at $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 the overnight low of $17.59 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 $18.21.

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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