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Strong dollar, rising bond yields continue to punish gold, silver

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(Kitco News) - Gold and silver prices are lower again in early U.S. trading Monday. Gold prices scored another nearly 2.5-year low overnight. Rising government bond yields and a soaring U.S. dollar index are the main bearish elements driving the precious metals markets south. October gold was last down $6.60 at $1,638.70 and December silver was down $0.195 at $18.71.

The global marketplace is experiencing rough waters Monday, in a continuation of keener risk-off trading attitudes seen late last week. U.S. and/or global economic recession worries are rising rapidly. Global stock markets were mostly lower overnight. U.S. stock indexes are pointed to lower openings and near last week's three-month lows when the New York day session begins. The Wall Street Journal today reported this year has been the worst year since 1930 for a "buy-the-dips" strategy in U.S. stock trading and investing. FOREX volatility and rising government bond yields are in the spotlight Monday.

The U.K.'s big plan to sell more government bonds in an effort to finance better economic growth has helped to prompt a rout in global government bond markets. "The bond vigilantes are back and the British pound is the target," read a Barron's headline today.

Broker SP Angel in an email dispatch this morning said gold saw a "minor flash crash" overnight. "The metal continues to get hammered" by the U.S. dollar. Foreign exchange volatility is rising, with the British pound passing its record low in 1984 and presently trading around $1.04 to the dollar. The Chinese yuan is nearing 2008 lows. "Traders are ramping up short positions on gold, with fund managers more bearish on the metal than any other time over the past four years, according to a Bloomberg report. Rising U.S. Treasury yields have been a major headwind to the gold and silver markets. "Gold ETF outflows continue, with holdings near their 2-year lows," said the broker.

Why selloff in gold is not over: $1,600 danger zone for gold price

The key outside markets today see Nymex crude oil prices weaker, hitting a seven-month low and trading around $78.25 a barrel. The U.S. dollar index is higher and pushed to another 20-year high in early U.S. trading. Meantime, the yield on the 10-year U.S. Treasury note is rising and presently fetching 3.673%. The 2-year Treasury note yield is 4.285%.

U.S. economic data due for release Monday includes the Chicago Fed national activity index and the Texas manufacturing outlook survey.

Live 24 hours gold chart [Kitco Inc.]

Technically, the October gold futures bears have the solid overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at the overnight high of $1,646.40 and then at $1,652.00. First support is seen at today's low of $1,624.40 and then at $1,615.00. Wyckoff's Market Rating: 1.0

Live 24 hours silver chart [ Kitco Inc. ]

September silver futures bears have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at the September low of $17.40. First resistance is seen at $19.00 and then at $19.40. Next support is seen at the overnight low of $18.435 and then at $18.00. Wyckoff's Market Rating: 2.0.

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 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.