Gold Down, Hits 5-Week Low; Fear In Market Place, Weaker USDX No Help TodayBy Jim Wyckoff, Kitco News
Thursday June 04, 2015 13:53
(Kitco News) - Gold closed the U.S. day session lower and hit a five-week low Thursday. The precious metals bulls were again perplexed that the slumping U.S. dollar index this week has not given a boost to gold and silver prices. Even some modest anxiety in the market place due to this week’s U.S. and German bond market routs did not spur any significant demand for safe-haven gold. August Comex gold was last down $9.60 at $1,175.30 an ounce. July Comex silver was last down $0.365 at $16.115 an ounce.
A feature in the market place this week has been the pummeling that U.S. and German bonds have absorbed. Those bond markets were already having a dismal week (falling prices/rising yields) when European Central Bank president Mario Draghi added fuel to the bearish fire on Wednesday by saying volatility in financial markets will be the norm and hinted that inflation is working its way back into the major world economies. Then on Thursday the International Monetary Fund said in a report the U.S. Federal Reserve should hold off on raising interest rates until 2016 and expressed concern about an inflation surprise hitting major world economies. That report also led many to believe IMF officials are worried about the specter of bond market illiquidity becoming problematic if the Fed begins to tighten its monetary policy this year. German and U.S. bond market prices hit their lowest levels in months on Thursday.
The roiled bond markets have spilled over into selling pressure and volatility in the world stock markets. If the financial market uncertainty becomes keener, my bias is that gold will see some safe-haven demand occur.
This week’s price action in gold underscores the fickle and frustrating nature of trading and investing in the markets, and especially gold and silver. Both precious metals had sold off recently when the U.S. dollar index rebounded strongly from its May low. Yet, this week’s sell off in the dollar index produced no buying support for gold or silver. And then the bond market turmoil this week that has rattled the market place, including the talk of what should be commodity-market-bullish inflation coming from the ECB and IMF produced no upside action in safe-haven gold or in silver. This week’s price action reminds me of the old market saying that I heard very early in my career: “Markets will do anything and everything imaginable, or even unimaginable, to frustrate the largest number of traders.” Or this one: “Markets can remain illogical longer than traders can remain solvent.”
In overnight news, reports said Greece and its international creditors have reached agreement on some elements of the restructuring of Greece’s debt burden to allow Greece relief and to get additional financing. Greece’s president and EU/IMF officials met late into the night Wednesday on the matter. This somewhat upbeat news development could also be putting some downside price pressure on the safe-haven gold market.
The U.S. dollar index bulls are having a tough week as prices today hit a two-week low. The greenback bulls and bears are now on a level near-term technical playing field but the bears have near-term momentum on their side late this week.
The other key “outside market” saw crude oil prices lower today. An OPEC oil cartel meeting is under way in Vienna, Austria. OPEC officials have hinted they are not going to lower their collective crude oil production. In my 30 years of following the energy markets, the OPEC cartel has gone from the world oil industry’s most dominant and feared element in the 1980s and 90s, to almost an after-thought in today’s age of the booming U.S. shale production.
The big report of this week and arguably the month is Friday morning’s May U.S. employment report from the Labor Department. The key non-farm jobs number is expected to come in at up 225,000. Look for active trade in the immediate aftermath of the jobs data Friday morning.
The London P.M. fix is $1,176.00 versus the previous A.M. fixing of $1,182.45.
Technically, August gold futures prices closed nearer the session low and hit a five-week low today. Gold bears have the firm overall near-term technical advantage and have re-established a near-term price downtrend. 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 March low of $1,143.80. First resistance is seen at today’s high of $1,186.60 and then at $1,190.00. First support is seen at today’s low of $1,172.40 and then at the May low of $1,170.00. Wyckoff’s Market Rating: 2.0
July silver futures prices closed nearer the session low today and hit a five-week low. Silver bears have the solid near-term technical advantage and have re-established a near-term price downtrend. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $16.80 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the April low of $15.595. First resistance is seen at $16.25 and then at today’s high of $16.50. Next support is seen at today’s low of $16.08 and then at $16.00. Wyckoff's Market Rating: 2.0.
July N.Y. copper closed down 395 points at 268.70 cents today. Prices closed nearer the session low and hit a six-week low today. Copper bears have the near-term technical advantage and have re-established a near-term price downtrend. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 283.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the March low of 255.40 cents. First resistance is seen at 270.00 cents and then at today’s high of 273.15 cents. First support is seen at today’s low of 267.65 cents and then at 265.00 cents. Wyckoff's Market Rating: 3.0.