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A.M. Kitco Metals Roundup: Comex Gold Lower, At 3-Mo. Low, On Fresh Short-Selling, Weak-Long Liquidation

Tuesday October 15, 2013 8:35 AM

(Kitco News) - Gold prices are lower and hit a three-month low in early U.S. trading Tuesday. New short-selling in the futures market along with liquidation of recently established long positions are featured as it appears the U.S. government is set to reopen. December Comex gold was last down $17.60 at $1,259.10 an ounce. Spot gold was last quoted down $13.40 at $1260.40. December Comex silver last traded down $0.674 at $20.695 an ounce.

As the U.S. government partial closure is in day 15, it finally appears the U.S. Congress and President Obama are making substantial progress on agreeing on a budget measure that includes extending the government’s soon-to-be hit overall debt ceiling. That’s bearish for safe-haven gold, even if it’s not a big surprise.

Many believe a U.S. budget/debt deal will be announced today, as the somewhat self-imposed Thursday debt-ceiling deadline approaches. If the U.S. lawmakers do reach a deal before Thursday, it would be pretty much what the market place had expected all along—a last-minute compromise. If no deal is reached by U.S. lawmakers before Thursday, serious strains in the markets would quickly surface, including keen safe-haven demand for gold. But that appears unlikely.

The sharply higher U.S. dollar index and lower crude oil prices are also bearish daily outside market factors for gold and silver markets Tuesday.

U.S. stock indexes and many other world stock markets have seen sharp rallies the past few days, not only on expectations that the U.S. lawmakers would reach a last-minute budget/debt agreement, but also on ideas the U.S. Federal Reserve will keep its very easy monetary policy (quantitative easing) in place for longer than what many had been expecting up until the U.S. government shutdown. With the government closure likely crimping the U.S. gross domestic product growth to a slight degree and also rattling investor confidence, it seems the Federal Reserve was prescient in leaving its monetary policies unchanged at its last FOMC meeting a few weeks ago. Add on top of that the nomination last week of perceived monetary policy dove Janet Yellen to head up the U.S. Federal Reserve next year, and most of the market place got a good dose of bullish tonic.

The dearth of U.S. economic data the past two weeks has put a damper on many markets, which could account for the generally low volatility seen during the government shutdown. The next big unknown for the market place when the U.S. government does reopen its doors is when and how will all the backed-up U.S. economic data be released, or will some of the reports just be permanently cancelled. At present there is no consensus on how this matter will play out, mainly because the government stats officials have been on furlough and probably have not yet even discussed how and when to disseminate the backed-up U.S. economic data. If much of the backed-up economic data is released in a short timeframe it could make for higher volatility in the market place, at least for a short period of time.

In other overnight news, the closely watched German ZEW economic expectations index rose to a higher-than-expected 52.8 in October versus a reading of 49.6 in September. The German DAX stock index hit a record intra-day high following the upbeat economic report.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and the Empire State manufacturing survey.

The London A.M. gold fix is $1,255.50 versus the previous P.M. fixing of $1,285.50.

Technically, December gold futures bears have the firm overall near-term technical advantage. Prices are in a seven-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 $1,300.00. 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 overnight high of $1,276.20 and then at Monday’s high of $1,291.60. First support is seen at the overnight low of $1,251.00 and then at $1,250.00.  

December silver futures hit a two-month low overnight. The bears have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $22.525 an ounce. The next downside price breakout objective for the bears is closing prices below major psychological support at $20.00. First resistance is seen at $21.00 and then at the overnight high of $21.325. Next support is seen at the overnight low of $20.495 and then at $20.25.

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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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