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Jim Wyckoff A.M. Kitco Metals Roundup: Comex Gold Lower, Silver Sharply Lower as U.S. Dollar Index Firmer, Crude Oil Weaker

03 May 2011, 08:20 a.m.
By Jim Wyckoff
Of Kitco News

(Kitco News) - Comex gold futures prices are trading lower Tuesday morning, while silver futures are under stronger selling pressure. A rebound in the U.S. dollar index and weaker crude oil prices have prompted profit-taking pressure in the precious metals. The silver bulls are fading, technically, and need to show fresh power soon. June gold last traded down $19.00 at $1,538.00. Spot gold last traded down $7.70 an ounce at $1,538.50. July Comex silver last traded down $2.70 at $43.39 an ounce.

The U.S. dollar index is moderately higher Tuesday morning after hitting a fresh 2.5-year low on Monday. The dollar index is just seeing a short-covering bounce in a bear market. The still-weak overall technical posture of the U.S. dollar index remains a bullish factor for the precious metals markets. However, the inverse trading relationship between the precious metals and the dollar index has become keener recently. Some market watchers wonder if the dollar index will put in a market low when the Federal Reserve quantitative easing program officially ends this summer.

Crude oil prices are lower Tuesday morning on some profit taking. However, prices are only modestly lower and the crude bulls still have the overall near-term technical advantage as June futures prices on Monday hit a fresh two-plus year high. The fact crude is trading above $112.00 a barrel is still an underlying bullish factor for the precious metals due to the inflationary implications.

Precious metals market bulls can still point to recent history being on their side, as dips in gold and silver have become bargain-hunting buying opportunities as prices have recovered and went on to set new highs.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs chain store sales report, the weekly Johnson Redbook retail sales report, manufacturers shipments and inventories and domestic auto sales.

The London A.M. gold fixing is $1,546.50 versus the previous P.M. fixing of $1,535.50.

Technically, gold bulls remain in overall technical command. There are still no early technical warning signals that a market top is close at hand. For gold, unlike silver, the recent lack of high intra-day price volatility remains bullish. Gold prices are in a three-month-old uptrend on the daily bar chart and in a 10-year-old uptrend on the longer-term monthly chart. Bulls' next near-term upside technical objective is to produce a close above solid resistance at Monday's all-time high of $1,577.40. Bears' next near-term downside price objective is closing prices below solid technical support at last week's low of $1,492.00. First resistance is seen at the overnight high of $1,551.40 and then at $1,560.00. First support is seen at $1,530.00 and then at $1,520.00.

July silver futures are trading sharply lower and near the session low Tuesday. The market is on the verge of suffering some significant near-term chart damage if further losses are seen this week. A close below strong chart support at this week's low of $42.20 would produce fresh chart damage. The specter of the much higher daily price volatility in silver is not a bullish clue for the market and is one early clue of a topping process in the market. At present, bulls still have the overall near-term and longer-term technical advantage, but are fading and need to show fresh power soon. The next downside price breakout objective for the bears is closing prices below solid technical support at Monday's low of $42.20. Bulls' next upside price objective is producing a close above solid technical resistance at last week's contract and 31-year high of $49.84 an ounce. First resistance is seen at $44.00 and then at $44.50. Next support is seen at the overnight low of $42.97 and then at $42.20.

If you are not following me on Twitter, then you missed my late-Monday afternoon brief on silver futures extending losses in after-hours trading. The precious markets will remain very active, even in after-hours trading. If you want market analysis fast, and in after-hours trading, then follow my up-to-the-second precious metals market perspective on Twitter. It's free, too. My account is @jimwyckoff .

By Jim Wyckoff of Kitco News;

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