(Kitco News) -Comex gold futures prices ended sharply lower Tuesday and hit a fresh three-week low, as investors worldwide are keenly focused on the potential for nuclear reactors in Japan producing catastrophic meltdowns. This high anxiety has caused most markets worldwide to sell off, save for U.S. Treasuries. Investors are looking to liquidate positions and move to the sidelines or into cash. Comex April gold last traded down $31.70 an ounce at $1,393.20. Spot gold last traded down $35.40 at $1,394.00.

Japan’s stock market dropped by around 11% Tuesday as liquidity in many markets worldwide appeared on the verge of getting seriously tight in very early trading Tuesday. The crisis in Japan has spilled over into extreme anxiety and uncertainty in most markets worldwide. “When in doubt, get out” is the old trading adage that investors invoked Tuesday, as they moved out of perceived riskier assets and to the sidelines or into cash and U.S. Treasuries.

The U.S. dollar index is traded solidly higher early Tuesday, but then backed off by the end of the day to trade near unchanged. Given the decline from the highs Tuesday it can be argued that the dollar index had been overdone on the downside recently and was due for just a good upside corrective bounce. Key for the dollar index is whether it can show important follow-through strength the rest of this week. At present, dollar index bears still have the overall technical advantage, which continues to be an underlying overall bullish factor for the precious metals markets.

Crude oil prices traded sharply lower Tuesday and fell below $100.00 a barrel due to the Japan crisis. At least a temporary reduction in crude oil demand from Japan has hit the crude oil market. Also, the fears of worldwide economic contraction in the wake of the Japan disaster have gripped the market place.

On precious metals traders’ minds at present is the key question: At what point will gold and silver once again become a bargain-hunting buying opportunity? Precious metals bulls can correctly argue this point: Every downturn in price, in recent history, has ultimately turned into a profitable value-buying opportunity. However, veteran traders also know that at some point all markets do eventually hit a peak that will stand for some time.

The London P.M. gold fix was $1,400.50 versus the previous P.M. fixing of $1,422.25.

Technically, April Comex gold futures prices closed nearer the session low in a big daily trading range. Significant near-term technical damage was inflicted Tuesday. A six-week-old price uptrend on the daily bar chart was negated. Key for the gold market now is, will there be follow-through selling pressure this week to produce more serious chart damage. Or, will Tuesday’s low cap losses and become just another “reaction low” in an uptrend that will restart soon? Tuesday’s low-range close does suggest there could be more selling pressure to come this week. Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at $1,420.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at Tuesday’s low of $1,380.70. First resistance is seen at $1,400.00 and then at $1,410.00. First support is seen at Tuesday's low of $1,380.70 and then at $1,375.00. Wyckoff's Market Rating: 6.5.

May silver futures closed down 166.5 cents at $34.18 an ounce Tuesday. Prices closed nearer the session low and hit a fresh three-week low. Some near-term chart damage was inflicted Tuesday as a six-week-old uptrend on the daily bar chart was at least temporarily negated. The silver bulls have the overall near-term technical advantage, but they did fade Tuesday and need to show fresh power soon. The next downside price breakout objective for the bears is closing prices below solid technical support at $33.00. Bulls' next upside price objective is producing a close above solid technical resistance at $35.50 an ounce. First resistance is seen at $34.50 and then at $35.00. Next support is seen at $34.00 and then at Tuesday’s low of $33.565. Wyckoff's Market Rating: 7.0.

May N.Y. copper closed down 480 points at 413.85 cents Tuesday. Prices closed near mid-range and did close at a fresh three-month low close Tuesday. Serious near-term chart serious chart damage has occurred in copper recently. Prices are in a four-week-old downtrend on the daily bar chart. Bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 430.00 cents. The next downside price breakout objective for the bears is closing prices below major psychological support at 400.00 cents. First resistance is seen at 415.00 cents and then at 420.00. First support is seen at 410.00 cents and then at Tuesday's low of 407.60 cents. Wyckoff's Market Rating: 4.0.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

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