(Kitco News) -Comex gold futures prices ended modestly higher Wednesday, as a fading U.S. dollar index is providing support to the yellow metal. However, a sell off in many commodity markets Wednesday, including crude oil, did limit the upside in gold. February Comex gold last traded up $2.60 at $1,370.80 an ounce. Spot gold last traded up $3.70 at $1,372.00.

The U.S. dollar index was under strong selling pressure again Wednesday and hit another fresh two-month low as the greenback bears have gained fresh downside near-term technical momentum. If the U.S. dollar index continues on a downward path in the near term, look for gold prices to trade sideways to higher.

Reports said good physical demand for gold from Asia, at the present lower price levels than seen last month, has also kept the gold market supported this week.

The precious metals markets and other commodity markets are keenly awaiting Thursday's Chinese consumer price inflation data. The Chinese government has warned it wants to keep domestic consumption and commodity price inflation in check. Any high inflation readings in China would be bearish for all commodity markets, as it would hint that Chinese monetary officials would implement new measures to crimp Chinese demand. Just last week Chinese monetary authorities raised the reserve requirement ratio for banks by 0.5%, to 19%, in an effort to reduce borrowing and cap inflationary pressures in the world's most populous nation.

While crude oil futures prices traded modestly lower Wednesday, the fact that prices are still hovering above $90.00 a barrel is a bullish underlying factor for the precious metals. If crude oil moves above $95.00 a barrel, that is likely to draw more investor interest into gold on ideas inflationary price pressures are heating up.

The London P.M. gold fix was $1,372.00 versus the previous P.M. fixing of $1,369.50.

Technically, February gold futures closed near mid-range Wednesday and saw more short covering and bargain hunting. Gold bulls still have more work to do in the near term to regain upside near-term technical momentum. A potentially bearish head-and-shoulders top reversal pattern is still in place on the daily bar chart. The gold market bulls do still have the overall near-term and longer-term technical advantage.

(NOTE: For a complete explanation of my exclusive "Wyckoff's Market Rating" system, just send me an email at jwyckoff@kitco.com and I'll attach it and send it back to you.--Jim)

Gold bulls' next near-term upside technical objective is to produce a close above solid technical resistance at last week's high of $1,392.90. Bears' next near-term downside price objective is closing prices below solid technical support at the January low of $1,352.70. First resistance is seen at Wednesday's high of $1,378.90 and then at $1,385.00. Support is seen at Wednesday's low of $1,365.50 and then at the December low of $1,361.60. Wyckoff's Market Rating: 6.5.

March silver futures closed down 8.2 cents at $28.83 an ounce Wednesday. Prices closed near the session low. A weaker U.S. dollar index did limit selling interest in silver Wednesday. The silver bulls have the overall near-term technical advantage. However, prices have been trending lower for nearly three weeks and the bulls need to show more power soon.

The next downside price objective for the silver bears is closing prices below solid technical support at this week's low of $28.05. Bulls' next upside price objective is producing a close above solid technical resistance at $30.00 an ounce. First resistance is seen at $29.08 and then at Wednesday's high of $29.49. Next support is seen at Wednesday's low of $28.725 and then at $28.50. Wyckoff's Market Rating: 7.0.

March N.Y. copper closed down 550 points at 437.30 cents Wednesday. Prices closed nearer the session low and scored a bearish "outside day" down on the daily bar chart. Profit-taking pressure was featured Wednesday and no serious chart damage occurred. The copper bulls still have the overall near-term technical advantage.

Bulls' next upside objective is pushing and closing prices above solid technical resistance at early-January's all-time high of 449.80 cents. The next downside price objective for the bears is closing prices below solid technical support at the January low of 425.05 cents. First resistance is seen at 440.00 and then at 442.50 cents. First support is seen at Wednesday's low of 435.60 cents and then at 432.50 cents. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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