Gold Slips Back to Near 5.5-Year Low as U.S. Dollar Index Continues Ascent

(Kitco News) - Gold prices are moderately lower in early U.S. trading Tuesday. A stronger U.S. dollar index that scored a seven-month high overnight has trumped the tepid safe-haven demand seen in the precious metal early this week, following last week’s Paris terror attacks. February Comex gold was last down $3.70 at $1,080.40 an ounce. March Comex silver was last down $0.014 at $14.235 an ounce.

A Wall Street Journal survey of 10 banks saw their analysts expecting the price of gold to average around $1,114.00 an ounce next year. The survey said the average cost for producers to mine gold is around $1,200.00.

World stock markets were mostly higher Tuesday as traders and investors try to move past the terror events in Paris late last week. Asian stock markets followed the U.S. stock market rally Monday. European stocks were higher, too, and helped by notions the European Central Bank will initiate fresh monetary policy stimulus soon. A European Central Bank official said Tuesday the Paris terror attacks will likely negatively impact the Euro zone economy.

The closely watched German ZEW economic expectations index was released Tuesday and came in at 10.4 in November versus 1.9 in October. The number was also well above market expectations.

A major theme in the marketplace continues to be the slumping raw commodity sector. Copper prices hit another six-year low in overnight trading. The red industrial metal’s price is a good gauge of the pace of overall world construction. Many other raw commodity prices are at or near multi-year lows. Sector leader Nymex crude oil prices are hovering just above $40.00 a barrel, with many oil market watchers now saying crude will likely slip back below the $40.00 mark. Crude oil will very likely have to lead a recovery in the raw commodity sector’s bust cycle.

U.S. economic data due out Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the consumer price index, real earnings, Treasury international capital data, industrial production and capacity utilization, and the NAHB housing market index.

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Wyckoff’s Daily Risk Rating: 2.5 (Trader and investor market risk aversion is not elevated at this time.)

(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).

Technically, gold bears have the solid near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Bulls’ next upside near-term rice breakout objective is to produce a close above solid technical resistance at $1,100.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,072.00. First resistance is seen at the overnight high of $1,085.00 and then at $1,090.00. First support is seen at the overnight low of $1,076.00 and then at the contract low of $1,073.70. Wyckoff’s Market Rating: 1.5

Silver bears have the firm near-term technical advantage. Bulls’ next upside price breakout objective is closing December futures 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 the August low of $14.005. First resistance is seen at $14.50 and then at last week’s high of $14.80. Next support is seen at last week’s low of $14.17 and then at $14.005. Wyckoff's Market Rating: 1.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff