(Kitco News) - Gold and silver prices are again sharply lower and hit nearly three-week lows in early U.S. trading Tuesday. Profit-taking pressure and weak long liquidation in the futures markets are featured in both precious metals early this week. June gold was last down $30.50 at $2,316.20. May silver was last down $0.245 at $27.00.
While major central banks and other longer-term investors have been snapping up gold bullion with no intention of selling it back anytime soon, it’s a different story with the shorter-term futures traders and the high leverage involved. That’s what’s driving this week’s downdraft in gold and silver prices: weak-handed futures traders (both in the U.S. and overseas futures markets) who are under water. Many of them are likely getting margin calls from their brokers. These shorter-term speculators are being forced to liquidate their losing long positions. Also, the fortunate futures traders that still hold a profit are taking those profits and getting out of the gold and silver futures markets. This is not anything new in futures markets trading. While the gold and silver bulls have lost their upside momentum, both markets remain overall firmly technically bullish. This week’s sell offs in the gold and silver markets are still just significant downside price corrections in major bull runs. However, if the sharp selling pressure continues deeper into this week, near-term technical damage would likely be inflicted to begin to suggest near-term market tops, if not major market tops, are in place. Trading action in gold and silver the rest of this week will be extra important. The bulls need to step up, stop the bleeding and show some fresh power soon to keep their bull runs alive.
Asian and European stock indexes were mixed overnight. U.S. stock indexes are pointed to toward slightly higher openings when the New York day session begins.
In other news, the Japanese yen continues to depreciate against the U.S. dollar. Japan’s finance minister today said the Japanese government will take appropriate measures against excessive currency moves, and that the government is watching the yen’s situation with a sense of urgency. Meantime a Bank of Japan governor said the BOJ will raise short-term interest rates if inflation moves toward 2%, as the BOJ expects to happen.
The key outside markets today see the U.S. dollar index slightly up. Nymex crude oil prices are near steady and trading around $81.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is fetching 4.63%.
U.S. economic data due for release Tuesday includes the Johnson Redbook retail sales report, the U.S. flash manufacturing and services purchasing managers indexes (PMI), the Richmond Fed business survey, and new residential sales.
Technically, the gold futures bulls have the firm overall near-term technical advantage. However, a nine-week-old uptrend on the daily bar chart has stalled out. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $2,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,250.00. First resistance is seen at $2,337.00 and then at the overnight high of $2,347.90. First support is seen at the overnight low of $2,304.60 and then at $2,300.00. Wyckoff's Market Rating: 7.0.
The silver bulls have the firm overall near-term technical advantage but are fading. A nine-week-old uptrend on the daily bar chart has stalled out. Silver bulls' next upside price objective is closing May futures prices above solid technical resistance at this week’s high of $28.795. The next downside price objective for the bears is closing prices below solid support at $25.00. First resistance is seen at the overnight high of $27.40 and then at $27.65. Next support is seen at the overnight low of $26.715 and then at $26.575. Wyckoff's Market Rating: 7.0.
(Hey! My “Markets Front Burner” weekly email report is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. Plus, I’ll throw in an educational feature to move you up the ladder of trading/investing success. And it’s free! Email me at jim@jimwyckoff.com and I’ll add your email address to my Front Burner list.)
