Gold Slumps Below $1,200 as U.S. Dollar Index SurgesBy Jim Wyckoff
Tuesday May 26, 2015 13:54
(Kitco News) - Gold prices ended the U.S. day session solidly lower, fell below the key $1,200.00 level and hit a two-week low Tuesday. A strong rally in U.S. dollar index is a major bearish weight for the precious metals. Market place focus remains on the greenback, despite some developments recently that could be perceived as friendly for the safe-haven gold market. August Comex gold was last down $17.10 at $1,187.80 an ounce. July Comex silver was last down $0.306 at $16.745 an ounce.
The U.S. dollar has surged against its counterparts early this week, continuing a strong rally that started last week. The buck has appreciated in part due to safe-haven demand due to the Greek debt crisis. The dollar hit an eight-year high against the Japanese yen Tuesday and hit a one-month high against the Euro currency. The U.S. dollar index hit a one-month high Tuesday, following a technically very bullish weekly high close last Friday that gave the index a fresh boost of power to suggest the index can continue to trend sideways to higher in the near term. That’s not good news for the raw commodity sector.
Sharply lower crude oil prices Tuesday were the other “outside market” that also worked against the precious metals bulls.
Traders and investors in Europe and the U.S. came back from a long holiday weekend to news that Greece says it will run out of money before its next debt payment is due, unless a new deal is struck with its creditors soon. Greece and its lenders are negotiating new terms to extend Greece’s loan payments, but the lenders are demanding that Greece overhaul its economy. Reports say limited progress has been made in the talks. A European Central Bank official said uncertainty over the outcome of the Greek debt negotiations could destabilize the European Union’s financial markets. The Group of Seven industrial nations will meet in Germany at mid-week, to likely discuss the Greece matter, as well as other world economic and financial issues.
While the gold market is presently seeing little safe-haven demand from the Greece debt matter, that could change in a hurry if the situation with Greece and its debt burden deteriorates.
The U.S. dollar bulls got some more positive fundamental news in recent days when Federal Reserve officials sounded more hawkish on U.S. monetary policy. On Friday Federal Reserve Chair Janet Yellen said a U.S. interest rate hike “would be appropriate at some point this year.” And on Monday Fed Vice Chairman Stanley Fischer said the U.S. central bank will gradually raise interest rates in the next three or four years, to bring borrowing costs back to normal.
A hefty slate of U.S. economic data for released Tuesday was neutral to slightly upbeat, which also did not work in favor of the gold and silver market bulls.
The London P.M. fix is $1,185.40 versus the previous A.M. fixing of $1,194.00.
Technically, August gold futures prices closed nearer the session low and hit a two-week low today. Gold bears have the firm overall near-term technical advantage and have gained downside momentum. 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 price breakout objective is closing prices below solid technical support at the May low of $1,170.00. First resistance is seen at $1,200.00 and then at today’s high of $1,208.90. First support is seen at today’s low of $1,185.60 and then at $1,180.00. Wyckoff’s Market Rating: 2.5
July silver futures prices closed nearer the session low today. Silver bears have regained the near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the May high of $17.775 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at $17.00 and then at today’s high of $17.18. Next support is seen at today’s low of $16.645 and then at $16.50. Wyckoff's Market Rating: 4.0.
July N.Y. copper closed down 355 points at 277.55 cents today. Prices closed near the session low and hit a four-week low today. The key “outside markets” were fully bearish for copper today as the U.S. dollar index was sharply higher and crude oil prices were sharply lower. Copper bears have regained the near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the May high of 295.60 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the April low of 266.00 cents. First resistance is seen at 280.00 cents and then at today’s high of 283.45 cents. First support is seen at today’s low of 277.30 cents and then at 275.00 cents. Wyckoff's Market Rating: 4.0.