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P.M. Kitco Metals Roundup: Gold Ends Solidly Down on Technical Selling that Began with Asian Drop

Thursday December 13, 2012 2:35 PM

(Kitco News) - Comex gold futures prices ended the U.S. day session solidly lower Thursday, on some fresh technically based selling that began in early Asian trading and then spread to Europe and the U.S. The key outside markets were also in a mildly bearish posture for the precious metals Thursday, as the U.S. dollar index was firmer and crude oil prices were weaker. February gold last traded down $22.00 an ounce at $1,695.90. Spot gold was last quoted down $17.10 at $1,695.00.  March Comex silver last traded down $1.362 at $32.42 an ounce.

Once again, the gold market suffered a rapid and inexplicable price drop in early Asian trading Thursday, on reported sell stops being triggered. Sell stops are pre-placed market orders to sell if a certain price is hit. That marks the third week in a row of such price declines that occur for seemingly no fundamental reason. Such moves are frustrating to the gold market bulls, and the silver bulls, too. The silver bulls were hit harder Thursday as it appears silver’s weakness began by following gold lower, but then heavier technical selling pressure set in for silver as the session wore on.

Attention of the market place has again focused to the U.S. “fiscal cliff” tax increases and spending cuts that is fast approaching. There is no apparent movement from either side on the matter, just more rhetoric from politicians blaming each other. The market was more on edge Thursday after Fed Chairman Bernanke on Wednesday warned that the U.S. Fed could do little to repair the damage from the politicians failing to come to agreement and the government going over the fiscal cliff. The market place had been reckoning odds were a bit higher than not that there would be a last-minute agreement among U.S. lawmakers to avoid the fiscal cliff. However, the lack of progress between the Obama administration and Congress as the year winds down is making traders very skittish. The overall situation continues to be a bearish drag on many markets, including the precious metals.

The market place is still digesting the U.S. Federal Reserve decision Wednesday to end its “Operation Twist” program but extend its long-bond-buying program to the tune of $45 billion a month. That news is what many had figured the central bank would do. The new plan would expand the Fed’s balance sheet and ostensibly print greenbacks. The FOMC also said it will begin tying interest rate policy to the U.S. unemployment rate, saying as long as unemployment is above 6.5%, rates will not rise. Some quick math on that matter suggests the Fed will not be raising interest rates for at least three more years. Wednesday’s Federal Reserve developments are a bullish underlying fundamental factor for the raw commodity markets, including precious metals, due to the inflationary implications. The gold and silver bulls were especially frustrated at the sell off in their metals Thursday, following the seemingly bullish FOMC news Wednesday.

In overnight news, European Union finance officials have agreed on a deal that would create a single bank supervisor and EU banking union. This is a big, positive step for the EU in its three-year-old sovereign debt crisis. The news lifted the Euro currency and lowered Spanish and Italian bond yields. The agreement still needs to be ratified by the European Parliament. Also Thursday Greece was approved to get a fresh tranche of EU bailout money. All in all Thursday was a very positive day in the European Union’s efforts at fixing its financial and economic problems. However, much more heavy lifting needs to occur in the coming months for the EU to continue on a path of recovery.

The U.S. dollar index was slightly higher Thursday, on some short covering. The greenback bulls have faded, technically, recently. Nymex crude oil futures prices are slightly lower Thursday. The crude oil bulls have faded a bit. These two key “outside markets” were in a modestly bearish posture for the precious metals Thursday morning and will continue to impact the precious metals markets on a daily basis.

The London P.M. gold fixing is $1,692.75 versus the previous London P.M. fixing of $1,716.25.

Technically, February gold futures prices closed nearer the session low Thursday and again dropped below key psychological support at the $1,700.00 level. Gold bulls have the slight overall near-term technical advantage but faded Thursday. The gold bulls’ next upside price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,725.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the November low of $1,674.70. First resistance is seen at $1,700.00 and then at Thursday’s high of $1,712.80. First support is seen at Thursday’s low of $1,690.70 and then at the December low of $1,684.10. Wyckoff’s Market Rating: 5.5

March silver futures closed nearer the session low Thursday and hit a fresh four-week low as the bulls have faded quickly. Some near-term chart damage was inflicted in silver Thursday. The silver bulls and bears are now back on a level near-term technical playing field. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $33.875 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $32.00. First resistance is seen at $32.75 and then at $33.00. Next support is seen at Thursday’s low of $32.28 and then at $32.00. Wyckoff's Market Rating: 5.0.

March N.Y. copper closed down 545 points at 366.15 cents Thursday. Prices closed nearer the session low and saw some profit taking after prices Wednesday hit a six-week high. Copper was pressured by mildly bearish “outside markets” that included a firmer U.S. dollar index and weaker crude oil prices. Copper bulls still have the overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 375.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 355.00 cents. First resistance is seen at 370.00 cents and then at this week’s high of 372.10 cents. First support is seen at 365.00 cents and then at the December low of 363.30 cents. Wyckoff's Market Rating: 6.0.

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

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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