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Gold Ends Slightly Lower On Mild Profit Taking From Recent Gains

(Kitco News) - Gold prices ended the U.S. day session slightly down Monday, on a profit-taking and corrective technical pullback from recent gains that saw prices hit a two-month high late last week. The mild downside correction was not unexpected given the good advance in gold prices, which have rallied by about 4% so far in 2016. February Comex gold was last down $1.90 at $1,096.0 an ounce. March Comex silver was last down $0.058 at $13.86 an ounce.

There is still anxiety in the world marketplace early this week after the Chinese stock market dropped Monday, by over 5%, and hit a four-year low in Hong Kong. Chinese financial and monetary authorities mostly stood aside and let the market trade after last week halting trading with circuit-breakers at one point. China officials did push up the value of the yuan against the U.S. dollar Monday, but that did little to stem the selling pressure on China equities. Australian and South Korean stocks also fell Monday. Japan’s markets were closed for a holiday.

The turmoil in China is prompting strains in the periphery currency markets early this year, reports said.

Crude oil prices are sharply lower again to start the trading week, which is also a concern for the market place—namely the deflationary implications. Nymex crude is trading around $31.00 a barrel and at a fresh 12-year low today. The other key “outside market” finds the U.S. dollar index trading slightly higher in early afternoon U.S. dealings.

Recent weaker Chinese economic data has spooked world markets. China is the world’s second-largest economy and is the world’s largest raw commodity importer.

Over the weekend the U.S. few a B-52 bomber with fighter jet escorts near the North Korean border, in a show of military might following last week’s apparent nuclear bomb test conducted by North Korea.

And there is still market concern about escalating violence in the Middle East as Saudi Arabia and Iran are in a stare-down at present.

Technically, gold bears still have the overall near-term technical advantage, but the bulls have gained upside momentum to suggest a market bottom is in place. Price action recently produced a bullish upside “breakout” from the sideways trading range at lower levels seen the past month. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,125.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,080.00. First resistance is seen at today’s high of $1,108.30 and then at last week’s high of $1,113.10. First support is seen at Friday’s low of $1,091.80 and then at $1,080.00. Wyckoff’s Market Rating: 3.5

Silver bears have the solid overall near-term technical advantage, as this market does not have the safe-haven status that does gold. Silver bulls’ next upside price breakout objective is closing December futures prices above solid technical resistance at the December high of $14.64 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the contract low of $13.62. First resistance is at $14.00 and then at last week’s high of $14.385. Next support is seen at $13.75 and then at $13.62. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff, contributing to Kitco News;
Follow me on Twitter @jimwyckoff



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