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A.M. Kitco Metals Roundup: Gold Lower, Pressured By Rebound In U.S. Dollar Index And Bearish Charts

Wednesday October 9, 2013 8:22 AM

(Kitco News) - Gold prices are solidly lower in early U.S. trading Wednesday. The rebound in the U.S. dollar index overnight and a bearish technical posture have the gold bears in command on this day. December Comex gold was last down $15.40 at $1,309.00 an ounce. Spot gold was last quoted down $10.40 at $1309.00. December Comex silver last traded down $0.373 at $22.06 an ounce.

The big news overnight is President Obama said he plans to nominate Federal Reserve Vice Chair Janet Yellen to the top spot of Chairman of the Fed. This news was not surprising but is still a bullish underlying factor for most markets, including the raw commodity sector and precious metals. Asian stock markets rallied overnight, due in part to the Yellen news. Yellen is perceived by the market place to be a dove when it comes to monetary policy.

Wednesday afternoon the minutes of the last FOMC meeting are released. Traders will closely examine that report to get a better feel on when the Fed might start to back off on its quantitative easing of U.S. monetary policy. Federal Reserve officials are speaking this week. Traders and investors will be very interested in seeing what these officials say about the U.S. government shutdown’s impact on the U.S. economy.

The partial U.S. government shutdown drags on and is in its ninth day with still no serious movement from either Democrats or Republicans. In fact, Tuesday both Republican lawmakers and President Obama appeared to “dig in their heels” on the confrontation. There is a rising unease in the world market place at present, but there is still not yet panic. The date now being pegged is October 17—the date at which some U.S. government officials now say the U.S. will start to default on its credit obligations. It appears the budget impasse and government closure could lead right up to the U.S. debt ceiling limit. There will likely be fresh news on this matter Wednesday, which could move the markets.

A German five-year note auction saw yields decline amid strong demand Wednesday, mostly due to the keener uncertainty regarding the U.S. government’s dysfunction on its budget and debt ceiling. The average yield on the German “Bobl” fell to 0.81% from 1.00% fetched a month ago.

Reports Tuesday quoted a major brokerage analyst as saying it’s a “slam dunk” that gold prices will fall significantly when the U.S. government finally does get a budget deal and raises the debt ceiling. I’ve gotten emails from traders and have read that other analysts and market watchers feel the very same way. I’ve been involved with trading and market analysis long enough to know that when a trading idea or market forecast seems like a “slam dunk,” beware. There’s an old market maxim: “Markets can and will do anything and everything possible to frustrate the largest number of traders.” Here’s another: “Markets can remain illogical longer than you (the trader) can remain solvent.”  Finally, there are guys like Warren Buffet who have been very successful using “contrary opinion” in their trading and investing methods. If you’d like to read more about contrarian thinking and trading, I wrote a feature story on the matter a while back. Just send me an email at jim@jimwyckoff.com and I’ll email you back the story.

U.S. economic data due for release Wednesday includes the FOMC minutes, the weekly MBA mortgage applications survey and the weekly DOE liquid energy stocks report. Most U.S. government economic data is not being released due to the U.S. government closure.

The London A.M. gold fix is $1,309.50 versus the previous P.M. fixing of $1,329.50.

Technically, December gold futures bears have the overall near-term technical advantage. Prices are in a six-week-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 last week’s high of $1,353.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the August low of $1,271.80. First resistance is seen at the overnight high of $1,323.30 and then at this week’s high of $1,330.80. First support is seen at $1,300.00 and then at $1,291.50.  

December silver futures bears have the overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $20.63. First resistance is seen at the overnight high of $22.41 and then at this week’s high of $23.525. Next support is seen at this week’s low of $21.65 and then at $21.44.

Follow me on Twitter to immediately get the very latest market developments. If you are not on board, then you are not getting key analysis and perspective as fast or as often as you could! Follow me on Twitter to get my very timely intra-day and after-hours briefs on precious metals price action. The precious markets will remain very active. If you want market analysis fast, and in after-hours trading, then follow my up-to-the-second precious metals market perspective on Twitter. It's free, too. My account is @jimwyckoff.

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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