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P.M. Kitco Roundup: Gold Up on Short Covering, Bargain Hunting, Weaker U.S. Dollar Index

Tuesday October 7, 2014 2:24 PM

(Kitco News) - Gold prices ended the U.S. day session modestly higher Tuesday, on short covering in the futures market and bargain hunting in the cash market. The weakening U.S. dollar index this week is also a bullish underlying factor for gold and the other precious metals. The gold market bulls are vigorously defending major technical support at the $1,180.00 area, which is the 2013 low. This important technical level could be an inflection point for the gold market. If the gold market bulls can continue to push prices higher this week, it would then be an early technical clue of at least a near-term market bottom being in place for the yellow metal. December Comex gold was last up $4.20 at $1,211.50 an ounce. Spot gold was last quoted up $4.40 at $1,211.60. December Comex silver last traded down $0.04 at $17.185 an ounce.

The International Monetary Fund on Tuesday reduced its world economic growth estimate, dropping the annual growth rate to 3.8% from 4% in an earlier forecast. The news is not surprising but did add a bit to the risk aversion seen in the market place on Tuesday. This pressured the U.S. stock market, which in turn also lent some buying interest to safe-haven gold.

There was also dour economic news coming out of the European Union Tuesday, as Germany’s factory output was down 4% on the month in August, which was well below expectations of a decline of 1.5%. The struggling European Union economy continues to be a major drag on the entire world economic system. The sinking Euro currency is a result of the economic troubles in the EU. Also, the U.S. dollar has garnered much of its recent strength from a flagging Euro currency.

Most of China has been on holiday the past week and Wednesday is the end of the Golden Week holiday. The commodity markets will see increased participation from the Chinese, and look to fresh China economic readings, as the world’s second-largest economy gets back to work.

The highlight of the U.S. data week is Wednesday afternoon’s FOMC minutes. Recent months have seen the FOMC minutes move the markets.

The London P.M. gold fix was $1,210.50 versus the previous London A.M. fixing of $1,207.57.

Technically, December gold futures prices closed nearer the session high Tuesday. Gold bears still have the firm overall near-term technical advantage. Prices are in a three-month-old downtrend on the daily bar chart. However, this week’s price action begins to hint the bears may be exhausted. 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 $1,232.70. Bears' next near-term downside breakout price objective is closing prices below strong longer-term technical support at $1,180.00. First resistance is seen at Tuesday’s high of $1,214.10 and then at $1,220.00. First support is seen at Tuesday’s low of $1,203.00 and then at $1,200.00. Wyckoff’s Market Rating: 2.5

December silver futures prices closed nearer the session low Tuesday. The silver bears have the solid overall near-term technical advantage as prices hover not far above last week’s contract and four-year low. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at Tuesday’s high of $17.625 and then at $18.00. Next support is seen at $17.00 and then at the contract low of $16.64. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed up 5 points at 303.60 cents Tuesday. Prices closed nearer the session high on mild short covering. Copper prices last week hit a 5.5-month low. Copper bears still have the firm overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 310.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the March low of 288.45 cents. First resistance is seen at Tuesday’s high of 304.35 cents and then at last week’s high of 306.75 cents. First support is seen at Tuesday’s low of 301.75 cents and then at 300.00 cents. Wyckoff's Market Rating: 3.0.

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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