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A.M. Kitco Metals Roundup: Gold Sees Corrective Bounce After Hitting 2.5-Year Low Overnight

Friday June 21, 2013 8:21 AM

(Kitco News) - Gold prices are moderately higher in early U.S. trading Friday, on a corrective technical bounce after August Comex futures fell to a 2.5-year low of $1,268.70 in overnight trading. The gold and silver market bears remain in strong technical control of their markets. Comex August gold last traded up $9.20 at $1,295.30 an ounce. Spot gold was last quoted up $18.60 at $1,297.00. July Comex silver last traded up $0.027 at $19.85 an ounce. July silver hit a 2.5-year low of $19.31 in overnight trading.

The market place is a bit calmer as trader attention moves to the U.S. stock market opening Friday morning. Asian stocks followed Wall Street’s lower price action Thursday. Asian stocks were also pressured by worries about a financial liquidity problem occurring in China as interest rates there have surged recently. Some weaker economic data out of China Thursday also spooked the Asian markets. Japan’s Nikkei did manage to post gains Friday.

European markets stabilized and were showing modest corrective bounces from Thursday’s selling pressure. There are some fresh financial problems surfacing in Greece late this week, which have driven the Greek 10-year bond yield above 11%.

There has been a strong flow of investment monies out of emerging markets recently. In fact, it appears most of the world market place is moving more into cash, as evidenced by most markets selling off late this week. There’s an old market adage that says when the going gets rough, if you can’t sell what you want, you sell what you can.

The market place is still digesting Wednesday’s U.S. Federal Reserve events, in which traders and investors generally decided the Fed will begin to wind down its monthly bond-buying program (quantitative easing) by the end of this year. Most markets did not take well that dose of news, even though it would be a stretch to call the Fed action Wednesday surprising.

The U.S. dollar index is slightly higher Friday morning as prices have made a big rebound from Wednesday’s four-month low. The strong rebound in the greenback does suggest the dollar index has put in a near-term low. Nymex crude oil prices are slightly higher Friday, after selling off sharply Thursday. The crude oil bears now have downside technical momentum.

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

The London A.M. gold fixing is $1,290.25 versus the previous P.M. fixing of $1,292.50.

Technically, the gold market bears are in strong near-term technical command. The door is open for more technical selling pressure in gold in the near term. The next major, longer-term downside price targets are $1,227, and then at $1,100 and then at $1,027 for nearby Comex futures. August gold futures prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price objective is to produce a close above solid technical resistance at the May low of $1,338.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,250.00. First resistance is seen at the April low of $1,323.00 and then at $1,338.00. First support is seen at the overnight low of $1,268.70 and then at $1,250.00.

Silver bears have the strong overall near-term technical advantage. Major chart damage has been inflicted this week to suggest still more downside price pressure in the near term. Prices are in an overall eight-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $21.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $19.00. First resistance is seen at the April low of $20.25 and then at $21.00. Next support is seen at the overnight low of $19.31 and then at $19.00.

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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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