Gold price sinking amid strong U.S. dollar, rising bond yields

(Kitco News) - Gold and silver prices are weaker in early U.S. trading Wednesday, with December gold futures notching a 6.5-month low. More chart-based selling is featured both metals at mid-week. An up-trending U.S. dollar index that hit another 6.5-month high overnight and a 10-year U.S. Treasury note yield that scored a 16-year high this week are bearish outside market elements for the two precious metals. December gold was last down $8.60 at $1,911.30 and December silver was down $0.161 at $23.04.

Asian and European stocks were mixed to firmer overnight. U.S. stock indexes are pointed to firmer openings when the New York day session begins. Risk appetite is still not keen at mid-week, as a likely U.S. government shutdown this weekend is weighing on marketplace sentiment.

In overnight news, China got some upbeat economic news. Industrial production in August saw the first increase in more than a year, reflecting higher output and slower producer price deflation. The report suggests potential stabilization in the world's second-largest economy. Meantime, China property developer Evergrande's top official is reported to be under police control.

In other news, Australia's consumer price inflation up-ticked in August, coming in at up 5.2%, year-on-year versus a rise of 4.9% in July.

The key outside markets today see the U.S. dollar index slightly higher and hit another 6.5-month high overnight. Nymex crude oil prices are higher and trading around $92.00 a barrel. A Wall Street Journal headline today reads: "Quiet Western drills set stage for $100 oil." Meantime, the benchmark U.S. Treasury 10-year note yield is presently near this week's multi-year high and fetching 4.503%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders and the weekly DOE liquid energy stocks report.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at the overnight high of $1,921.70 and then at Tuesday's high of $1,935.50. First support is seen at $1,900.00 and then at this year's low of $1,883.80. Wyckoff's Market Rating: 2.5

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may well halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at Tuesday's high of $23.39 and then at $23.70. Next support is seen at the overnight low of $22.92 and then at the September low of $22.555. Wyckoff's Market Rating: 3.5.

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By

Jim Wyckoff

For Kitco News

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