(Kitco News) - Gold and silver prices are sharply lower in midday U.S. trading Tuesday, due in part to a big sell off in crude oil prices this week that has sent shudders through the entire raw commodity sector. Weak long liquidation and profit taking from the shorter-term futures traders was featured in both metals markets today. August gold was last down $26.60 at $2,342.60. July silver was last down $1.174 at $29.605.
Featured in the marketplace this week is the drop in crude oil prices. Nymex crude oil futures overnight slumped to a four-month low of $72.48 and in the past three trading sessions prices have lost over $5.00 a barrel. The drop in oil prices comes as OPEC has just agreed to extend its existing production cuts. Worries about slowing global economic growth are prompting much of the selling pressure on crude oil. There are also doubts OPEC can hold together its collective output reduction quotas for an extended period. Raw commodity sector leader crude oil’s price downdraft is also spilling over into selling pressure in other raw commodity markets this week. If oil prices continue to drop, most other raw commodity markets will have a much harder time scoring price gains.
A Dow Jones Newswires headline today reads: U.S. rate cuts likely to win back Western gold investors.” The story says World Gold Council chief market strategist John Reade said elevated U.S. interest rates have hurt U.S. and European demand for gold. However, he said investment interest in the yellow metal has held up well due to better demand from global central banks, especially emerging countries’ central banks.
The U.S. data point of the week, if not the month, comes with Friday’s May employment situation report from the Labor Department. The key non-farm payrolls number is seen coming in at up 178,000 versus the April report showing a gain of 175,000 jobs.
Investors and traders are also anticipating Thursday’s European Central Bank (ECB) meeting. The expectation is that the ECB will get ahead of the central-bank pack and cut its main interest rate by 25 basis points.
The key outside markets today see the U.S. dollar index near steady. Nymex crude oil prices are lower and trading around $73.25 a barrel. The benchmark 10-year U.S. Treasury note yield is presently around 4.3%.
Technically, August gold bulls have the overall near-term technical advantage but have faded. A bearish double-top reversal pattern has formed on the daily bar chart to suggest a near-term market top is in place. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $2,477.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $2,308.70. First resistance is seen at $2,350.00 and then at this week’s high of $2,375.50. First support is seen at this week’s low of $2,334.80 and then at $2,325.00. Wyckoff's Market Rating: 6.0.
July silver futures bulls have the overall near-term technical advantage but are fading. A four-week-old uptrend on the daily bar chart has been negated to suggest a near-term market top is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at the May high of $32.75. The next downside price objective for the bears is closing prices below solid support at $28.00. First resistance is seen at $30.00 and then at $30.50. Next support is seen at today’s low of $29.505 and then at $29.00. Wyckoff's Market Rating: 6.5.
(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.)
