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Jim Wyckoff P.M. Kitco Metals Roundup: Comex Gold, Silver Prices Slide as Volatile Energy Futures Trading Spooks All Commodity Bulls

11 May 2011, 02:20 p.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) - Comex gold and silver futures prices ended solidly lower Wednesday as a temporary halt to energy futures trading in New York spooked a already- jittery commodity market traders. Sharply lower crude oil prices and a strong rebound in the U.S. dollar index prompted the heavy selling pressure in the precious metals. Price action the rest of this week becomes extra critical for the precious metals markets. June gold last traded down $16.00 at $1,500.00. Spot gold last traded down $14.50 an ounce at $1,502.00. July Comex silver last traded down $3.31 at $35.18 an ounce.

The CME Group futures conglomerate halted trading in Nymex liquid energy futures in New York for the first time since 2008 when gasoline futures hit limit down of 25 cents a gallon, following a bearish U.S. Department of Energy weekly report on energy stocks. Trading resumed shortly afterward with daily trading limits expanded by double the normal amounts for liquid energy futures. Still, the already-nervous commodity sector, including precious metals, saw selling pressure accelerate after the halt to energy futures trading. Crude oil had made a good recovery from last week's spike low, but today's sell off did fresh chart damage as prices saw a downside "breakout" from a bearish pennant pattern on the daily bar chart for June crude oil futures. Crude oil is the leader in the raw commodity market sector, and if price weakness in crude continues, upside price potential in other commodity markets will at least be limited.

When the crude oil market sold off sharply the U.S. dollar index rallied to post strong gains on a perceived safe-haven move into the greenback. Greece is the latest European Union nation to move to the front burner, regarding the EU's sovereign debt and financial saga. Ratings agency downgrades for Greece's debt and news reports Greece may even pull out of the EU have pressured the Euro currency recently and supported the U.S. dollar index. The overall technical posture of the U.S. dollar index remains bearish. However, U.S. dollar index bulls have shown some strength recently and any sustained recovery in the U.S. dollar index would be a bearish development for the precious metals and other commodity markets.

Reports overnight said China's consumer price index in April rose 5.3%, year-on-year, which was slightly higher than expected and was initially supportive to the inflation-sensitive precious metals. The Chinese government has been battling inflationary pressures by hiking its interest rates and tightening its monetary policy in recent months. However, the latest consumer price index data shows the government has more work to do to tamp down inflationary price pressures.

The London P.M. gold fixing $1,508.00 versus the previous P.M. fixing of $1,513.50.

Technically, June Comex gold futures closed nearer the session low and scored a bearish "outside day" down on the daily bar chart--whereby Wednesday's high was higher and low was lower than Tuesday's trading range, with a lower close. After showing a good rebound for three days in a row, following late last week's selling pressure, the gold market bulls did fade Wednesday. However, bulls do still have the overall near-term and longer-term technical advantage. This week's trading action is extra important, technically. A close at or near the weekly high on Friday would be significantly bullish to suggest the uptrend on the daily chart being restarted. However, a close Friday at or near the weekly low would be significantly bearish to suggest still more downside price pressure in the near term. Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at $1,550.00. Bears' next near-term downside price objective is closing prices below solid technical support at last week’s low of $1,462.50. First resistance is seen at $1,510.00 and then at $1,520.00. First support is seen at $1,492.00 and then at $1,480.00. Wyckoff's Market Rating: 6.5.

July Comex silver futures prices closed nearer the session low Wednesday and scored a big and bearish "outside day" down on the daily bar chart. The bulls had shown some good rebounding power in recent days, but did fade badly Wednesday. Like gold, how silver market prices end the trading week this Friday (near the weekly high or near the weekly low) will be very technically significant regarding price action in the coming weeks. A stronger U.S. dollar and sharply lower crude oil prices today helped to sink the silver market today. Serious near-term chart damage has occurred in silver recently. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $33.035. Bulls' next upside price objective is producing a close above solid technical resistance at $40.00 an ounce. First resistance is seen at $36.00 and then at $36.50. Next support is seen at $35.00 and then at $34.50. Wyckoff's Market Rating: 4.5.

July N.Y. copper closed down 1,315 points at 391.05 cents Wednesday. Prices closed near the session low and hit a fresh 5.5-month low. A stronger U.S. dollar and sharply lower crude oil and stock index futures prices today helped to sink the copper market. Copper bears have the near-term technical advantage as serious near-term technical damage has been inflicted recently. Copper prices are in a four-week-old downtrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 410.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 380.00 cents. First resistance is seen at 392.80 cents and then at 395.00 cents. First support is seen at Wednesday's low of 390.75 cents and then at 387.50 cents. Wyckoff's Market Rating: 3.5.

This evening I will tweet on after-hours price action in gold and silver. It could be another critical overnight session. If you want daily, or nightly, up-to-the-second market analysis on gold and silver price action, follow me on Twitter. It's free, too. My account is @jimwyckoff .

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

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