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(Kitco News) - Comex December gold futures prices careened sharply lower Wednesday on strong profit-taking pressure and the liquidation of weak-handed long positions. This week the general market place has tilted, at least temporarily, toward the "risk on" investor mentality, which is bearish for gold and has added to the strong downside price pressure seen in the precious metals. Importantly, no serious technical damage has yet been inflicted in gold and a downside price correction was not unexpected after prices had risen by around $300.00 in August. However, the size of Wednesday's one-day sell off was an eye-opener. December gold last traded down $103.00 at $1,758.00 an ounce. Spot gold last traded down $75.20 an ounce at $1,754.50. December Comex silver last traded down $2.99 at $39.34 an ounce.

Gold traders decided to book profits after prices Tuesday pushed to a fresh all-time record high of $1,917.90 an ounce, basis the active December futures contract. Tuesday's sharp losses somewhat spooked the gold market bulls and led to more selling pressure Wednesday. While no serious chart damage occurred Wednesday, the gold market was very likely psychologically damaged by the mammoth sell off. Thus, the gold market bulls need to step up and show fresh power soon to avoid some serious near-term technical damage being inflicted. Still, if recent history continues to play out, investors and traders will at some point "buy the dip" in prices, reckoning they are getting a bargain buy. But it does take a brave soul to step in and buy when gold prices have just tumbled $100.00 an ounce in one day.

This week's Federal Reserve symposium in Jackson Hole, Wyoming is attracting trader and investor attention. It was at last year's event in Jackson Hole that Fed Chairman Ben Bernanke unveiled a fresh U.S. economic stimulus package. Given the recent spate of weak U.S. economic data, some reckon the Fed will announce another monetary stimulus effort at this year's meeting (QE3). Bernanke is scheduled to give a speech in Jackson Hole on Friday. However, there is no clear consensus regarding whether Bernanke will spell out a fresh stimulus plan on Friday. Still, most commodity markets are being supported and the U.S. dollar index pressured this week by trader notions there will be some fresh U.S. monetary policy stimulus coming at some point, and sooner rather than later.

Anticipation regarding the Bernanke Jackson Hole speech Friday has temporarily pushed to the back burner the European Union debt crisis. But the ongoing EU debt crisis remains gold market bullish. Greek bond yields have hit record highs this week. There is a growing notion among economists and analysts that the European Union cannot, in its current form, survive the debt crisis. The EU debt crisis will remain an underlying bullish factor for gold.

The U.S. dollar index traded mixed and was firmer in late trading Wednesday. Prices are trading near the recent lows. The greenback bears still have the strong overall near-term technical advantage. That's also a bullish factor for the precious metals.

Crude oil prices traded near steady Wednesday. The crude oil bulls this week have regained a bit of upside technical momentum. The crude oil market will continue to be a major "outside market" force for the precious metals.

The London P.M. gold fixing was $1,770.00 versus the previous P.M. fixing of $1,876.00.

Technically, December gold futures prices closed near the session low Wednesdasy and did see some psychological damage inflicted, but no serious chart damage--yet. There was strong follow-through selling pressure Wednesday, after sharp losses scored on Tuesday, and a big and bearish "key reversal" down was confirmed on the daily chart, which is one early technical clue that a market top is in place. While it should be noted that twice this month bearish key reversals down have occurred on the daily bar chart and prices went on to score new highs, the size of this key reversal is massive and makes it more powerful than the others. Gold bulls do still have the overall near-term and longer-term technical advantage, but do need to now step up and show fresh power soon to keep the near-term chart advantage. Bulls can correctly argue there have been big daily moves on the upside recently, and some big daily downside corrections on the downside should not be surprising. Prices are still in a 6.5-month-old uptrend on the daily bar chart and in a 10-year-old uptrend on the monthly chart. Bulls' next near-term upside technical objective is to produce a close above psychological resistance at $1,800.00. Bears' next near-term downside price objective is closing prices below solid technical support at $1,725.00. First resistance is seen at $1,775.00 and then at $1,800.00. First support is seen at $1,750.00 and then at $1,725.00. Wyckoff's Market Rating: 7.0.

December silver futures prices closed near the session low Wednesday on profit taking and long liquidation. Bulls faded Wednesday but no serious chart damage occurred. Bulls do need to show fresh power soon to avoid near-term chart damage. The silver bulls still have the overall near-term technical advantage. Bulls' next upside price objective is producing a close above strong technical resistance at this week's high of $44.295 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the August low of $37.055. First resistance is seen at $40.00 and then at $40.50. Next support is seen at $39.00 and then at $38.50. Wyckoff's Market Rating: 6.0.

December N.Y. copper closed up 10 points 401.55 cents Wednesday. Prices closed near mid-range. Trading has turned choppy. A big bearish pennant pattern is still in place on the daily bar chart. However, a downside breakout needs to occur very soon or the pattern will be negated. Copper bears still have the overall near-term technical advantage. 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 the August low of 384.20 cents. First resistance is seen at this week's high of 405.80 cents and then at 407.50 cents. First support is seen at 400.00 cents and then at Wednesday's low of 398.40 cents. Wyckoff's Market Rating: 4.0.

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

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