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P.M. Kitco Metals Roundup: Gold Down Sharply, at 3.5-Mo. Low, on Technical Selling, Stops Hit; Manipulation Discussed

Tuesday December 18, 2012 2:05 PM

(Kitco News) - Comex gold futures ended the U.S. day session sharply lower and hit a fresh 3.5-month low Tuesday. The gold market started to sell off in late-morning trading right about the time that U.S. House Speaker Boehner mentioned a "Plan B" on the fiscal cliff negotiations. It was also about the time the soybean futures market dropped sharply on reports China had cancelled some previously booked U.S. soybean purchases—leading to some speculation of less demand for commodities coming from China. However, both bits of news probably had no big impact on precious metals markets Tuesday. Fresh technically related selling pressure was the more likely culprit on the slide in gold and silver prices. Sell stops were triggered just below key near-term technical support levels in gold and silver. February gold last traded down $29.20 an ounce at $1,688.80. Spot gold was last quoted down $30.10 at $1,668.50.  March Comex silver last traded down $0.66 at $31.62 an ounce.

Tuesday’s major sell off in the gold market, amid no major, fresh fundamental news to move prices so sharply, once again has many market watchers scratching their heads. The past few weeks have seen similar, unexpected and seemingly inexplicable quick downside price moves in gold and silver. Many traders and investors are wondering (and many are frustrated) regarding the role of “manipulators” in the gold and silver markets. Watching, trading and analyzing the markets on a full-time basis for more than a quarter-century, there is no doubt in my mind that bigger players in the market place can and do manipulate markets—on a short-term basis. The big boys like to catch the market in thin, low-volume conditions so they can have as big of a desired price impact as possible when they execute their bigger trades. Such activity is not exclusive to the gold and silver markets. It happens in nearly all traded markets—and it is nothing new.

What is important to remember is that no individual trader or individual firm can control (manipulate) a market’s price for very long. Even the major central banks of the world have tried manipulation in the currency markets (central bank intervention to the tune of billions in currency) with only marginal initial success, and not a lasting impact. Regarding any longer-term conspiracy to manipulate the price of gold or silver (lower), I cannot say for sure if that is the case or not—because I have never had the time to completely research the matter. However, I do know that by looking at the longer-term monthly chart for gold I see that prices are presently in a solid 11-year-old uptrend and that gold has been one of the best upside market performers of any asset class for the past 11 years. If some big outfit has been trying to manipulate gold to the downside, it has not worked very well for them the past 11 years.

My mission at Kitco has been and will continue to be as an advocate for you, the smaller to medium-sized trader and investor. That means calling it just like I see it--nothing more or nothing less. I am continually thinking of ways I can better serve you, my valued Kitco reader. I am now working on producing a daily report that will point out to you where I believe the buy and sell stop orders are located, on a daily basis, in the gold and silver futures markets. The recent surprising daily price moves in the gold and silver markets are partly due to sell stops being triggered. “Stops” are pre-placed orders to buy or sell once a certain price is hit. I’ve studied technical analysis, watched the markets and traded them for over 25 years. I have a pretty good idea of where the buy stops and sell stops are located in the markets, on a daily basis. Knowing beforehand where the buy stops and sell stops are located in the markets gives a trader a better idea regarding at what price level, if triggered, a bigger, quicker price move can occur as stops are hit. I think you will enjoy and benefit from this new daily report.

Attention of the market place remains on the U.S. “fiscal cliff” tax increases and spending cuts that is fast approaching. Early this week there has been significant movement on the Republican side toward more middle ground, which suggested both sides are coming closer to a deal, but not that close yet. This has given the U.S. and world stock markets a boost early this week. The market place still reckons odds are higher than not that there will be a last-minute agreement among U.S. lawmakers to avoid the fiscal cliff. The overall situation has been a bearish drag on many markets, including the raw commodities and stock markets.

In overnight news, Asian and European stock markets also pushed higher on the apparent progress on the U.S. fiscal cliff talks. Data from the European Union showed Spain’s local banks held a record amount of bad debt in October as overall loans dropped to a five-year low. This is a reminder of the major financial and economic problems that EU leaders face in the coming months.

The U.S. dollar index was lower Tuesday and hit a fresh two-month low. The greenback bulls have faded recently. Nymex crude oil futures prices were firmer Tuesday. The crude oil bears still have the slight near-term technical advantage. These two key “outside markets” were in bullish posture for gold and silver Tuesday, but that could not overcome the technical selling pressure. These two key “outside markets” will continue to impact the precious metals markets on a daily basis.

The London P.M. gold fixing is $1,694.00 versus the previous London P.M. fixing of $1,695.75.

Technically, February gold futures prices closed nearer the session low Tuesday, hit a fresh 3.5-month low and scored a technically bearish "outside day" down on the daily bar chart, whereby the day's high is higher and low is lower than Monday's daily trading range, with a lower close. Prices Tuesday dropped below important near-term chart support at the November low of $1,674.70, and also below the key 200-day moving average on the daily chart, which came in at $1,668.80 on Tuesday. Serious near-term chart damage was inflicted Tuesday, to re-establish a 2.5-month-old downtrend on the daily bar chart. Gold bears now have the overall near-term technical advantage. The gold bulls’ next upside price breakout objective is to produce a close above psychological resistance at $1,700.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,650.00. First resistance is seen at $1,674.40 and then at 1,684.10. First support is seen at Tuesday’s low of $1,662.00 and then at $1,650.00. Wyckoff’s Market Rating: 4.0

March silver futures prices closed nearer the session low Tuesday, scored a bearish “outside day” down on the daily bar chart and hit a fresh six-week low. The silver bears Tuesday gained the slight near-term technical advantage as prices are in a three-week-old downtrend on the daily bar chart. Near-term chart damage has been inflicted in silver recently, including more Tuesday. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $33.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the November low of $30.79. First resistance is seen at $31.75 and then at $32.00. Next support is seen at Tuesday’s low of $31.40 and then at $31.00. Wyckoff's Market Rating: 4.5.

March N.Y. copper closed down 165 points at 365.00 cents Tuesday. Prices closed near the session low. 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 Tuesday’s high of 364.80 cents and then at this week’s high of 369.30 cents. First support is seen at the December low of 363.30 cents and then at 360.00 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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