Gold, silver down as USDX rallies, crude oil drops, bond yields up-tick

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(Kitco News) - Gold and silver prices are lower near midday Wednesday. Early safe-haven buying of the precious metals following a surprise downgrade of U.S. government debt gave way to selling pressure from a rally in the U.S. dollar index to a three-week high, a rise in U.S. Treasury yields and a sell off in the crude oil market. December gold was last down $6.80 at $1,972.00 and September silver was down $0.491 at $23.84.

There is some keener risk aversion in the marketplace at mid-week, following the surprise move by the Fitch credit rating agency to downgrade U.S. the government’s credit rating to AA+ from AAA. It was the first downgrade by a major credit rating agency in more than a decade. Fitch cited “expected fiscal deterioration” of the U.S. government in the coming years, amid a growing government debt burden. Traders and investors are not badly shaken over the surprise Fitch news, but it did somewhat deflate heretofore upbeat marketplace attitudes that had recently pushed U.S. stock indexes to new highs for the year. The early safe-haven demand for gold and silver was usurped by the aforementioned bearish outside markets on this day.

Today’s U.S. ADP national employment report for July showed a much-larger-than-expected gain of 324,000 workers; the number expected to come in at up 175,000 and compares with a gain of 497,000 in the June report. The stronger reading also likely put some downside price pressure on the gold and silver markets, as the data fell into the camp of the U.S. monetary policy hawks, who want to see more interest rate increases from the Federal Reserve.

Traders are awaiting the U.S. data point of the week on Friday: the U.S. employment situation report for July. The key non-farm payrolls number is expected to come in at up 200,000 jobs, compared to a rise of 209,000 in the June report.

The key outside markets today see the U.S. dollar index solidly higher and at a three-week high. Nymex crude oil prices are lower and trading around $79.75 a barrel after hitting a nine-month high early on today. A Wall Street Journal story today has the headline: Oil prices perk up as recession worries ebb and supply tightens.” Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 4.124%.  

Technically, December gold futures prices hit a three-week low today. Bulls and bears are on a level overall near-term technical playing field but the bears have some downside momentum. Bulls’ next upside price objective is to produce a close above solid resistance at the July high of $2,028.60. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $1,939.20. First resistance is seen at today’s high of $1,992.20 and then at $2,000.00. First support is seen at $1,960.00 and then at $1,950.00. Wyckoff's Market Rating: 5.0.

September silver futures prices hit a three-week low today. The silver bulls still have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Silver bulls' next upside price objective is closing prices above solid technical resistance at the July high of $25.475. The next downside price objective for the bears is closing prices below solid support at the June low of $22.34. First resistance is seen at $24.00 and then at $24.50. Next support is seen at $23.50 and then at $23.25. Wyckoff's Market Rating: 5.5.

September N.Y. copper closed down 595 points at 384.90 cents today. Prices closed nearer the session low today. The bulls have run out of gas. The copper bulls still have the slight overall near-term technical advantage. Prices are still in a nine-week-old uptrend on the daily bar chart, but now just barely. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the April high of 418.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the June low of 368.30 cents. First resistance is seen at 390.00 cents and then at 396.40 cents. First support is seen at today’s low of 383.40 cents and then at 380.00 cents. Wyckoff's Market Rating: 5.5.