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Gold Down as U.S., European, Japan Stocks Up; Silver Hits 6-Yr. Low

(Kitco News) - Gold is solidly lower in early U.S. trading Wednesday, pressured by rallies in most major world stock markets today that have pulled investor interest away from the safe-haven metal. An upbeat U.S. durable goods orders report Wednesday morning also put more selling pressure on gold. However, there is an entire U.S. trading session that lies ahead, and no one knows what the end of the day will bring. A weakening in the U.S. stock market as today’s session progresses would likely boost the gold market. December Comex gold was last down $13.30 at $1,125.10 an ounce. September Comex silver hit a six-year low this morning and was last down $0.465 at $14.14 an ounce.

The eyes of the market place remain focused on China, which has the world’s second-largest economy, which is now in trouble. China’s central bank injected $22 billion into its financial system Wednesday after their markets closed, in order to prop up its flailing stock market. Government officials also restricted trading in stock index futures, reports said. After a volatile session that saw prices trade on both sides of unchanged, China’s Shanghai stock index ended down 1.3% on the day. However, Japan’s Nikkei stock index rebounded and rose 3% on Wednesday.

European stock markets were firmer in midday trading, while U.S. stock indexes are sharply higher in preopening trading. As was the case Tuesday, how the U.S. stock indexes close will be most important.  In late trading Tuesday, the U.S. stock indexes sold off sharply and gave back strong early gains to finish in mostly negative territory on the day. Look for another volatile trading day in many markets Wednesday, and look for the significantly higher volatility to continue in many markets for at least the rest of this week. This higher volatility in many markets will at the least limit selling interest in gold.

The key “outside markets” early Wednesday find Nymex crude oil futures prices near steady but are still trading below $40.00 a barrel after dropping to a six-year low below $38.00 on Monday. The U.S. dollar index is also near steady after dropping to a seven-month low on Monday.

There was more dour world economic news Wednesday, as the OECD think tank reported economic growth among the world’s developed countries slowed in the second quarter, led by Japan’s economy, which slipped into recession. The OECD pegged the collective GDP of the 34 largest economies at up 0.4% from the first quarter. The first quarter GDP rate was up 0.5%.

Later this week U.S. Federal Reserve officials gather in Jackson Hole, Wyoming for their annual meeting to discuss monetary policy and other economic issues. Past meetings have produced news that moved the markets. However, Fed Chair Janet Yellen will not attend this year’s meeting in Jackson Hole.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders, the weekly DOE liquid energy stocks report, and the New York Federal Reserve holds a press briefing on its regional economy.

(Note: Follow me on Twitter--@jimwyckoff--for breaking market news.)

Wyckoff’s Daily Risk Rating: 3.0 (Trader and investor market risk appetite has somewhat returned to the market place at mid-week, but amid high volatility in many markets.)

(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 5, with 1 being least risk-averse (most risk-on) and 5 being the most risk-averse (risk-off).

The London A.M. gold fix is $1,134.40 versus the previous P.M. fix of $1,137.50.

Technically, December gold futures bears have regained the near-term technical advantage. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,169.80. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,100.00. First resistance is seen at $1,140.00 and then at the overnight high of $1,146.00. First support is seen at today’s low of $1,127.90 and then at $1,120.00. Wyckoff’s Market Rating: 4.0

September silver futures bears have the solid near-term technical advantage as prices hit a six-year low today. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $15.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.00. First resistance is seen at $14.50 and then at today’s high of $14.705. Next support is seen at today’s contract low of $14.11 and then at $14.00. Wyckoff's Market Rating: 1.0.

By Jim Wyckoff, contributing to Kitco News;
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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