P.M. Kitco Metals Roundup: Comex Gold Sharply Lower as Weak U.S. Economic Data Prompts Safe-Haven Buying of U.S. Treasuries

1 July 2010, 2:18 p.m.
By Jim Wyckoff
Of Kitco News www.kitco.com

Comex gold futures prices closed sharply lower, near the session low and hit a fresh three-week low Thursday, as near-term technical damage was inflicted and safe-haven buying interest disappeared. August gold closed down $37.90 at $1,208.00 an ounce. Spot gold was last quoted down $35.20 at $1,207.50.

Gold on Thursday at least temporarily yielded its safe-haven status to the U.S. Treasury market, as bonds and notes gained at the expense of a slumping U.S. dollar and U.S. stock market after a batch of weak U.S. economic data was released earlier in the day. Weekly U.S. jobless claims were higher, while construction spending declined and a U.S. manufacturing survey was deemed disappointing.

Meantime, the Euro currency rallied on a Spanish bond auction that went better than expected, and following Wednesday's news of a smooth European Central Bank debt transaction with other European banks. The at least slightly improving investor sentiment regarding the European Union's debt situation this week did prompt selling pressure in the gold market Thursday. Investors had been buying gold as a hedge against further declines in European currencies amid the EU debt crisis.

The bearish specter of price deflation is also hanging over all the commodity markets this week, led by a declining crude oil futures market. The record-low U.S. Treasury yields this week do suggest the specter of price deflation is very real. Price deflation is the archenemy of all commodity markets, including gold.

The London P.M. fixing was $1,234.00 compared to the previous P.M. fixing of $1,244.00.

Technically, August gold futures saw significant near-term technical damage inflicted Thursday, as prices dropped below what was solid technical support at the last "reaction low" on the daily bar chart, at last week's low of $1,225.20, which has at least temporarily negated the near-term price uptrend on the daily chart. The gold bulls do still have the overall near-term technical advantage, but did fade Thursday and need to show fresh power soon to avoid further near-term chart damage.

Bulls' next upside technical objective is to produce a close in August Comex gold futures above solid chart resistance at $1,250.00. Bears' next downside price objective is closing prices below psychological support at $1,200.00. First resistance is seen at $1,216.20 and then at $1,220.00. Support is seen at Thursday's low of $1,205.30 and then at $1,200.00. Wyckoff's Market Rating: 7.0.

December silver futures closed down 88.0 cents at $17.851 an ounce Thursday. Prices closed near the session low and hit a fresh three-week low as serious near-term chart damage was inflicted Thursday. The key "outside markets" were in a mostly bearish posture for silver Thursday, as the U.S. stock indexes were lower and crude oil prices were sharply lower.

The silver bulls do still have the slight overall near-term technical advantage. The next downside price objective for the bears is closing prices below solid technical support at the June low of $17.335. Bulls' next upside price objective is closing prices above solid technical resistance at $18.88 an ounce. First resistance is seen at $18.00 and then at $18.28. Next support is seen at Thursday's low of $17.825 and then at $17.75. Wyckoff's Market Rating: 6.0.

December N.Y. copper closed down 750 points at 289.90 cents Thursday. Prices closed nearer the session low and were pressured by sharply lower crude oil prices and a weaker U.S. stock market. Bears have the overall near-term technical advantage and have regained downside power this week. The next downside price objective for the copper bears is closing prices below solid technical support at the June low of 277.00 cents. Bulls' next upside objective is pushing and closing prices above solid technical resistance at this week's high of 313.75 cents. First resistance is seen at Thursday's high of 295.95 cents and then at 300.00 cents. First support is seen at Thursday's low of 288.00 cents and then at 285.00 cents. Wyckoff's Market Rating: 3.0.

 

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.