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Jim Wyckoff A.M. Kitco Metals Roundup: Comex Gold Lower as Traders Digesting Egypt News

31 January 2011, 08:29 a.m.
By Jim Wyckoff
Of Kitco News

(Kitco News) - Comex gold futures prices are trading moderately lower Monday morning. Traders are determining the overall implication of late last week's serious escalation in the unrest in Egypt. As of Monday morning, it appears traders reckon Friday's solid price gains in gold were a bit of an over-reaction. Comex gold last traded down $8.20 at $1,332.50 an ounce. Spot gold last traded down $6.20 at $1,332.50.

Still, Egypt's civil discontent and the uncertainty regarding the situation will keep the sellers in gold at least somewhat timid for the near term. In fluid situations like the one in Egypt at present, no one can predict if the worst is over, or is yet to come, regarding demonstrations and violence. It cannot be ruled out or even considered unexpected that gold could see much stronger buying interest in the coming days, on a flight-to-safety move by investors. Reason: The civil unrest in Egypt could spread to other Middle Eastern countries, or there could be a move by Egyptian protesters to close the vital Suez Canal.

The U.S. dollar index is trading weaker Monday morning, as Friday's short-covering bounce and support from the Egypt news has faded quickly. That is also gold-market-bullish. The already technically weakened U.S. dollar index is also in danger of closing at a technically bearish monthly low close. The dollar index bears still have downside near-term technical momentum, which is an underlying bullish factor for the precious metals. Gold bulls have been disappointed recently that the yellow metal has not seen more upside support from the weaker dollar index.

Reports overnight said the Chinese Lunar new year is likely to squelch physical demand for gold from China and other parts of Asia for the near term, along with the uncertainty of Asian investors about the Egypt situation. It was also reported in the news that an official from China's central bank said the Chinese government should increase its official holdings of gold and silver.

U.S. economic data due for release Monday includes the ISM New York business report; personal income and outlays; the ISM Chicago business survey; and the Texas manufacturing outlook survey.

The London A.M. gold fixing was $1,333.50 versus the previous P.M. fixing of $1,319.00.

Technically, Friday's upside bounce in the gold market did not do much to change the overall near-term technical posture of the gold market. Prices hit a three-month low Friday morning and the gold market is still in a four-week-old downtrend on the daily bar chart for February Comex gold. Monday is an extra important trading day, technically, and the gold market could produce a bearish monthly low close if there is some stronger selling pressure on Monday.

Gold market bulls still have the overall longer-term technical advantage. A 10-year-old uptrend is in place on the longer-term charts. Nearby Comex gold futures prices could drop below $1,200.00 an ounce before any significant longer-term technical damage would start to be inflicted to then suggest that a major market top is in place.

Gold bulls' next near-term upside technical objective is to produce a close above solid technical resistance at last week's high of $1,352.40. Bears' next near-term downside price objective is closing prices below psychological support at $1,300.00. First resistance is seen at $1,340.00 and then at Monday's high of $1,345.90. Support is seen at $1,320.00 and then at last week's low of $1,307.70.

March silver futures last traded down 9.4 cents at $27.825 an ounce Monday morning. Prices hit a fresh 2.5-month low on Friday and then did rebound strongly by the close to produce a bullish "outside day" up on the daily bar chart and close at the weekly high close on Friday. Silver bulls have the overall longer-term technical advantage and did regain some fresh upside momentum on Friday. But the silver bulls still have more work to do in the near term to jump-start an uptrend in the market.

The next downside price objective for the silver bears is closing prices below solid technical support at last week's low of $26.30. Bulls' next upside price objective is producing a close above solid technical resistance at $29.49 an ounce. First support is seen at the overnight low of $27.52 and then at $27.00. Next resistance is seen at $28.00 and then at the overnight high of $28.425.


By Jim Wyckoff of Kitco News;

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