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P.M. Kitco Roundup: Gold Careens to Nearly 3-Year Low as Weak-Handed Longs Throw in the Towel, and on Fresh  Short Selling in Futures

Wednesday June 26, 2013 2:43 PM

(Kitco News) - Gold and silver prices plummeted to nearly three-year lows Wednesday as both markets saw weak-handed long liquidation and technical short-selling in the futures markets. As the second quarter winds down, Comex gold and silver futures prices are set to see their poorest quarterly price performances ever recorded, on a percentage basis. August gold was last down $46.60 at $1,228.30 an ounce. Spot gold was last quoted down $48.30 at $1,229.75. July Comex silver last traded down $0.976 at $18.55 an ounce.

Several factors are working against the precious metals markets and the raw commodity sector, in general. A strong batch of U.S. economic data on Tuesday further bolstered notions the Fed will begin to wean the U.S. economy from its easy-money policies, which for several years have been a bullish underlying factor for the raw commodity sector, including the precious metals. Last week’s hawkish Federal Reserve FOMC meeting is still reverberating in the market place.

European Central Bank President Mario Draghi said Wednesday the ECB will keep its monetary policy accommodative for the foreseeable future. Draghi’s statement echoed other major central bank officials who earlier this week made more dovish remarks. There is some speculation in the market place that Fed Chairman Ben Bernanke believes the market place misinterpreted the results of last week’s FOMC meeting as too hawkish.

A cash crunch in China recently has also worked to reduce demand for physical gold in that nation. Also, major gold consumer India is also seeing slack demand for physical gold after the Indian government slapped additional duties on the import of gold in order to reduce its trade deficit. Other raw commodity markets are also seeing selling pressure because of worries about China’s economy, which is the second-largest in the world.

The U.S. dollar index was higher Wednesday and hit a three-week high. The greenback bulls have technical momentum on their side, and that is another negative for the precious metals and the raw commodity sector.

The market place mostly ignored a surprisingly weak final revision to U.S. first quarter gross domestic product, which came in at 1.8% growth on an annual basis. Traders reckoned that was old news and instead are more keenly focused on the U.S. economic readings that more recently have shown a general strengthening.

The London P.M. gold fixing is $1,236.25 versus the previous P.M. fixing of $1,279.00.

Technically, August gold futures closed nearer the session low Wednesday and saw a downside “breakout” from a bearish pennant pattern on the daily bar chart, which I pointed out to you on Tuesday. The gold bears have the strong overall near-term technical advantage. There are no early, purely technical clues to suggest that a market bottom is close at hand. Gold prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,200.00. First resistance is seen at $1,250.00 and then at Wednesday’s high of $1,277.50. First support is seen at Wednesday’s low of $1,223.20 and then at $1,200.00. Wyckoff’s Market Rating: 1.0

July silver futures prices closed nearer the session low Wednesday. Silver bears have the strong overall near-term technical advantage. There are no early technical clues that a market bottom is close at hand. Prices are in an eight-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above major psychological resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $17.50. First resistance is seen at $19.00 and then at Wednesday’s high of $19.58. Next support is seen at Wednesday’s low of $18.63 and then at $18.50. Wyckoff's Market Rating: 1.0.

July N.Y. copper closed down 260 points at 304.65 cents Wednesday. Prices closed near mid-range. Copper bears have the solid near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 320.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 290.00 cents. First resistance is seen at this week’s high of 309.50 cents and then at 313.80 cents. First support is seen at Wednesday’s low of 301.70 cents and then at 300.00 cents and then at the contract low of 298.35 cents. Wyckoff's Market Rating: 1.0.

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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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