A.M. Kitco Metals Roundup: Gold Higher on Short Covering

By Jim Wyckoff
15 March 2010, 8:30 a.m.

Gold prices are moderately higher in early trading Monday, on short covering after recent selling pressure that saw futures prices on Friday hit a fresh three-week low and close at a technically bearish weekly low close.

The gold market bulls are encouraged by the yellow metal's ability Monday morning to hold gains amid a firmer U.S. dollar index and weaker crude oil prices.

Traders will scrutinize Monday's U.S. economic data that includes the New York Federal Reserve's Empire State manufacturing index and U.S. industrial production. The major U.S. economic event of the week is the meeting of the Federal Open Market Committee on Tuesday and Wednesday. Precious metals traders are likely to be tentative ahead of the results of that meeting.

Spot gold in Europe was slightly higher Monday on some better physical demand from China and the Middle East, said wire service reports. The fresh demand from China has the gold market bulls taking notice, following recent comments from a Chinese monetary official who suggested China may not be adding gold to its existing reserves. Gold's gains were somewhat limited in European trading after a weekend news report said the German government is considering selling gold reserves to support a European monetary fund. However, reports also said the Deutsche Bundesbank denied the reports and said it would not support such a plan.

In overnight trading, the London A.M. gold fix was $1,104.00 versus the previous afternoon fixing of $1,106.25.  London silver was fixed at $17.02 an ounce, versus the previous fixing of $17.31.

Technically, April Comex gold did produce a bearish weekly low close and a bearish "outside day" down on the daily bar chart on Friday. Once again, a five-week-old price uptrend on the daily bar chart is in jeopardy of being negated and the bulls need to show more price strength early this week to keep it in place. See on the daily bar chart for April gold that the Moving Average Convergence Divergence (MACD) indicator has also just produced a bearish line crossover signal, whereby the thick blue MACD line has crossed below the thin red "trigger" line of the indicator. For April gold, shorter-term technical resistance is seen at $1,110.00 and then at  $1,120.00. Buy stops likely reside just above those levels. Sell stops likely reside just below shorter-term support at the overnight low of $1,101.00 and then at Friday's low of $1,097.30. Solid technical support is located at $1,088.50. Today's key near-term Fibonacci pivot level for April gold: $1,116.00.

Comex silver futures are slightly lower in early trading Friday. May silver last traded down 3.3 cents an ounce at $17.015. Prices remain in a five-week-old uptrend on the daily chart. Silver bulls maintain the near-term technical advantage. May silver finds shorter-term technical resistance at the overnight high of $17.18 an ounce, and then at Friday's high of $17.35. Buy stops likely reside just above those levels. Shorter-term technical support for May silver is located at last week's low of $16.835 and then at $16.75. Sell stops are likely placed just below those levels. Today's key Fibonacci pivot level for May silver futures is located at $16.99.

By Jim Wyckoff, contributing to Kitco News; jim@jimwyckoff.com