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Jim Wyckoff A.M. Kitco Metals Roundup: Comex Gold Higher, at 2-Month High, While Silver Hits 31-Year High

01 March 2011, 08:11 a.m.
By Jim Wyckoff
Of Kitco News

(Kitco News) - Comex gold futures prices are trading higher Tuesday morning and hit a fresh two-month high as the market closes in on the all-time high of $1,434.10, scored in early December. Meantime, Comex silver futures notched a fresh 31-year high overnight. The precious metals are seeing
support from continued safe-haven investment demand amid the ongoing tensions in the Middle East. A weakening U.S. dollar index is also an underlying bullish factor for the metals. Comex April gold last traded up $10.80 an ounce at $1,420.70. Spot gold last traded up $8.60 at $1,420.25.

The precious metals markets remain in a fully bullish technical and fundamental posture. Fundamentally, the specter of inflationary price pressures worldwide is gaining more attention. Federal Reserve Chairman Ben Bernanke speaks to the Senate Tuesday on U.S. monetary policy. Traders will closely scrutinize his comments, knowing the Fed is still leaning toward a very accommodative monetary stance, which does augur for more inflation in the coming months. Commodity prices in general are at multi-year highs, while the central banks of the major industrial economies have implemented quantitative easing the past 12 months. Those are two key components for inflationary price pressures. 

The civil unrest in the Middle East has not seen any major fresh developments. However, the situation in Libya is still tense. The overall Middle East situation and its uncertainty are still inviting safe-haven investment demand into the precious metals markets. Any flare-up in the Middle East would now likely push gold to a new all-time record high.

The U.S. dollar index hit another fresh four-month low overnight. The technical posture of the index remains weak at present. If the dollar index continues to trade sideways to lower, which is what the technical picture is suggesting at present, then that would continue to be gold-market-bullish.

Crude oil futures prices are trading firmer Tuesday, which is also a positive factor for the precious metals market bulls.

U.S. economic reports due for release Tuesday include the weekly Goldman Sachs chain store sales index, the weekly Johnson Redbook retail sales report, the ISM manufacturing survey and construction spending. Fed Chairman Bernanke speaks to the U.S. Senate Tuesday on monetary policy.

The London A.M. gold fixing was $1,414.50 versus the previous P.M. fixing of $1,411.00.

Technically, the gold market bulls have the solid near-term and longer-term technical advantage as prices hit a fresh two-month high overnight. Prices are in a four-week-old uptrend on the daily bar chart. On the longer-term charts, gold prices have been trending higher for 10 years.

Gold bulls' next near-term upside technical breakout objective is to produce a close above strong technical resistance at the all-time high of $1,434.10, scored in early December. That level is now within striking distance. Bears' next near-term downside price breakout objective is closing prices below psychological support at $1,400.00. First resistance is seen at the January high of $1,426.30 and then at $1,434.10. Support is seen at the overnight low of $1,409.80 and then at $1,400.00.

May Comex silver futures last traded up 59.0 cents at $34.41 an ounce Tuesday morning. Prices hit a fresh 31-year high overnight. Silver bulls have the strong overall near-term and longer-term technical advantage. Prices are in a four-week-old uptrend on the daily chart and produced a bullish monthly high close on Monday.

The next downside price breakout objective for the silver bears is closing prices below solid technical support at last week's low of $31.705. Bulls' next upside price objective is producing a close above solid technical resistance at $35.00 an ounce. First support is seen at $34.00 and then at the overnight low of $33.79. Next resistance is seen at $34.50 and then at $35.00.


By Jim Wyckoff of Kitco News;

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