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A.M. Kitco Metals Roundup: Gold Sharply Lower On Profit Taking, Sell Stops, Firmer U.S. Dollar

Tuesday April 15, 2014 8:26 AM

(Kitco News) - Surprisingly, the gold market is under strong selling pressure in early U.S. trading Tuesday--despite the tensions in Ukraine being ratcheted up at least one notch overnight. Gold had recently rallied on safe-haven demand due to the geopolitical unrest. Sell stop orders were triggered on Tuesday’s downdraft that accelerated just after the Comex futures market opened. This week’s firmer U.S. dollar index can be explained as one factor putting downside price pressure on gold Tuesday, along with profit taking and a corrective pullback from the recent gains that saw gold prices hit a three-week high Monday. June gold was last down $35.10 at $1,292.50 an ounce. Spot gold was last quoted down $34.60 at $1,292.50. May Comex silver last traded down $0.655 at $19.36 an ounce.

Gold’s price action Tuesday is a reminder of the age-old saying: “Markets can and will do anything and everything to frustrate the largest number of traders.” Still, it’s my bias that gold price action will get upside support if the Russia-Ukraine crisis further escalates. During the European Union sovereign debt crisis that helped to drive gold to its all-time high a few years ago there were days when gold prices were sharply lower even though the EU debt crisis had new and seemingly gold-bullish developments. Still, Tuesday’s price action in gold is confounding to many market watchers.

The Russia-Ukraine crisis is the dominant market theme this week. The latest development overnight saw the Ukrainian president order his troops to regain control of the cities in eastern Ukraine that had been taken over by pro-Russia rebels. Ukraine government officials have accused Russia of instigating and even arming the protesters. There is also uncertainty regarding how the U.S. will react to the latest developments in the region. This conflict will remain a major markets-moving factor for at least the rest of this week.

In other overnight news, the key German economic reading, the Zew economic expectations index, came in at 43.2 in April, down from 46.6 in March. The decline was more than what forecasters were expecting and mostly due to worries about the Ukraine-Russia confrontation. However, the Zew current conditions index rose to its highest level in three years in April, coming in at 59.5 versus 51.3 in March. Germany is the strongest economy in the European Union.

Traders and investors are awaiting key economic data from China on Wednesday, including its gross domestic product reading. China is the world’s largest consumer of raw commodities.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the consumer price index, the Empire State manufacturing survey, Treasury international capital data, and the NAHB housing market index.

Wyckoff’s Daily Risk Rating: 7.5 (The Russia-Ukraine tensions are squarely on the front burner of the market place.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,311.50 versus the P.M. fixing of $1,325.75.

Technically, June Comex gold bears have quickly reclaimed the level near-term technical advantage with Tuesday’s strong selling pressure. Prices Tuesday dropped below the key 200-day moving average that is closely watched by many chartists. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,331.40. Bears' next near-term downside breakout price objective is closing prices below technical support at the April low of $1,277.40. First resistance is seen at $1,300.00 and then at $1,310.00. First support is seen at Tuesday’s low of $1,284.40 and then at $1,277.40.  

May silver futures bears have the solid near-term technical advantage and gained more downside momentum Tuesday as prices hit a 2.5-month low. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $20.40 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 $19.575 and then at $20.00. Next support is seen at Tuesday’s low of $19.22 and then at $19.00.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff



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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