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A.M. Kitco Metals Roundup: Gold Sells Off Again, Hits Fresh 3.5-Mo. Low, on Stronger U.S. GDP Report

Thursday December 20, 2012 8:11 AM

(Kitco News) - Comex gold futures prices are trading solidly lower Thursday morning and hit another fresh 3.5-month low following a surprisingly strong reading on third quarter U.S. gross domestic product. Silver futures followed gold to the downside and hit a fresh four-month low. Gold prices had been trading near steady prior to the GDP report’s release. February gold last traded down $14.50 an ounce at $1,653.50. Spot gold was last quoted down $13.50 at $1,653.00.  March Comex silver last traded down $0.791 at $30.35 an ounce.

Gold and silver markets sold off sharply in the immediate aftermath of the release of U.S. third-quarter GDP data, which showed a surprisingly strong reading of up 3.1%, on an annualized basis. The market place expected a reading of up 2.8%. Fresh sell stop orders were triggered when prices dropped below technical support at Tuesday’s low of $1,662.00 in February gold. Sell stops were also triggered when March silver futures dropped below strong chart support at the November low of $30.79.

In overnight action, U.S. stock indexes were slightly higher and European stocks were narrowly mixed as investors worried about the U.S. fiscal cliff negotiations that appear to have again stalled, after some movement toward an agreement was apparent earlier in the week. The U.S. House of Representatives is set to vote on a “Plan B” budget plan that President Obama said he will veto. U.S. lawmakers have until January 3 to come to agreement before the government falls off the fiscal cliff. Markets do not like uncertainty and most markets will remain jittery until the fiscal cliff issue comes to pass.

In other overnight news, the Bank of Japan announced another monetary stimulus plan Thursday, which was not unexpected.

The U.S. dollar index is lower again Thursday morning. Prices Wednesday hit a three-month low. The greenback bears have gained good downside technical momentum recently, which should be bullish for the precious metals and is limiting selling pressure Thursday morning. Meantime, Nymex crude oil futures prices are slightly firmer early Thursday. The crude oil bulls have some fresh upside near-term technical momentum on their side, which also should be a bullish underlying factor for the precious metals.

Other U.S. economic reports due for release Thursday are many and include the weekly jobless claims report, the consumer confidence index, revised corporate profits, existing home sales, leading economic indicators, the Philadelphia Fed business survey, the monthly house price index, and foreign central bank holdings.

The London A.M. gold fixing is $1,667.00 versus the previous London P.M. fixing of $1,665.00.

Technically, February gold futures prices Thursday hit another fresh 3.5-month low.  Prices are now trading below the key 200-day moving average on the daily chart, which comes in at $1,668.30 on Thursday. Serious near-term chart damage has been inflicted this week, to re-establish a 2.5-month-old downtrend on the daily bar chart. Gold bears 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 Thursday’s high of $1,672.80 and then at Wednesday’s high of 1,677.80. First support is seen at $1,650.00 and then at $1,640.00.

March silver futures on Thursday hit a fresh four-month low. The silver bears have the near-term technical advantage, and have downside near-term technical momentum, as prices are in a steep three-week-old downtrend on the daily bar chart. Near-term chart damage has been inflicted in silver recently, including more on Thursday. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $32.60 an ounce. The next downside price breakout objective for the bears is closing prices below major psychological support at $30.00. First resistance is seen at $31.00 and then at Thursday’s high of $30.475. Next support is seen at $30.25 and then at $30.00.

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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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