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A.M. Kitco Metals Roundup: Gold Sharply Down, Hits 4-Yr Low, on Technical Selling, Strong US Dollar, Rallying Equities

Friday October 31, 2014 8:26 AM

(Kitco News) - Gold prices are sharply lower, hit a four-year low and fell below major long-term technical support that was located at the $1,180.00 area in early U.S. trading Friday. The precious metals are still feeling the bearish effects of a strong rally in the U.S. dollar index. The big rally in world stock markets late this week is also a negative that is pulling away funds from the precious metals markets. December Comex gold was last down $25.60 at $1,173.10 an ounce. Spot gold was last quoted down $26.00 at $1,173.40. December Comex silver last traded down $0.345 at $16.07 an ounce.

There’s a lot going on in the world market place Friday, on this last trading day of the week and of the month. There are three features at work Friday morning: U.S. stock indexes hit fresh record or multi-year highs overnight, the U.S. dollar index is surging, and gold prices have slumped to a four-year low. All have occurred in the wake of Wednesday afternoon’s FOMC statement that was deemed surprisingly hawkish on U.S. monetary policy.

The world equity markets and the greenback got an added boost overnight when the Bank of Japan surprisingly announced further and somewhat aggressive monetary policy easing measures. The BOJ move is an attempt to ward off deflationary pressures that have wracked Japan’s economy for at least the past 15 years. The Japanese yen sunk on the news, but Japan’s Nikkei stock index rallied on the BOJ easing. Other Asian and European stock markets also rallied Friday.

In other overnight news, consumer price inflation in the European Union remains worrisomely low. Figures Friday showed October consumer prices were up 0.4%, on an annual basis, versus the 0.3% rise, year-on-year, seen in September. The core inflation rate in the EU was reported at up 0.7% in October compared to up 0.8% in September. Look for the European Central Bank to continue to look to monetary policy stimulus, in an effort to revive the moribund EU economy.

U.S. economic data due for release Friday includes the employment trends cost index, personal income and outlays, the ISM Chicago business survey, and the University of Michigan consumer sentiment survey.

Wyckoff’s Daily Risk Rating: 4.0 (The market place is in a significant “risk-on” mood Friday. Geopolitical risks have been moved to the back burner…for now.)

(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 fixing is $1,173.25 versus the previous P.M. fixing of $1,202.00.

Technically, gold bears have the solid overall near-term technical advantage and gained more power Friday. The drop below the major support area at $1,180.00 produced serious chart damage that now suggests gold prices will embark on a fresh leg down. A challenge of $1,000.00 an ounce in the coming months cannot be ruled out. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,200.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,100.00. First resistance is seen at $1170.00 and then at $1,180.00. First support is seen at $1,150.00 and then at $1,140.00.  

December silver futures bears have the solid near-term technical advantage and gained more power today. Prices hit a four-year low overnight. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $15.00. First resistance is seen at $16.00 and then at $16.25. Next support is seen at the overnight low of $15.635 and then at $15.50.

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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