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A.M. Kitco Metals Roundup: Comex Gold Firmer On Safe-Haven Buying, Short Covering

Wednesday October 16, 2013 8:26 AM

(Kitco News) - Gold prices are modestly higher in early U.S. trading Wednesday. Safe-haven demand and short covering are featured amid the U.S. government’s ongoing budget and debt debacle. December Comex gold was last up $6.70 at $1,279.90 an ounce. Spot gold was last quoted down $1.00 at $1280.50. December Comex silver last traded up $0.084 at $21.275 an ounce.

The U.S. government remains partially closed on day 16. The U.S. Congress and President Obama are bumping right up against the Thursday deadline for which the U.S. Treasury says it will begin to run out of cash to pay its bills. The sticking point appears to be the House of Representatives’ conservative Republicans who refuse to work with the Senate. Meetings between U.S. lawmakers will be ongoing Wednesday, to try to get a last-minute agreement on the U.S. budget and debt ceiling that would reopen the U.S. government.

The present sense of the market place is that a U.S. budget/debt deal will still be reached before the Thursday deadline. Such is pretty much what the market place had expected all along—a last-minute compromise. However, traders and investors worldwide are becoming more anxious as Thursday approaches and still no deal. If no deal is reached by U.S. lawmakers by the end of Wednesday, or if negotiations between congressional leaders break down, serious strains in the markets would very quickly surface, including keen safe-haven demand for gold. That scenario appeared unlikely Tuesday, but on Wednesday morning anxiety in the market place is on the rise. It could be a volatile day in the markets on Wednesday and/or Thursday.

The Fitch ratings agency late Tuesday placed U.S. debt on watch and warned it could downgrade the U.S. credit rating if no agreement on the budget and debt ceiling is reached soon. In another sign of keener risk aversion worldwide, the German government auctioned a two-year treasury note Wednesday and there was very strong demand for it—the strongest demand in over two years. German debt is considered a safe-haven asset by European investors.

European and Asian markets were on hold Wednesday, amid the U.S. budget/debt impasse and the looming Thursday U.S. debt ceiling deadline.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the NAHB housing market index, Treasury international capital data, and the Fed’s beige book.

The London A.M. gold fix is $1,278.25 versus the previous P.M. fixing of $1,270.50.

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 this week’s high of $1,291.60 and then at $1,300.00. First support is seen at the overnight low of $1,273.70 and then at last week’s low of $1,259.60.  

December silver futures 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 the October 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 the overnight high of $21.42 and then at this week’s high of $21.68. Next support is seen at $21.00 and then at $20.63.

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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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