Credit: Shutterstock photo(Kitco News) - Comex gold futures prices are trading solidly lower and hit a fresh three-month low Tuesday morning. A reported surprise drop in the U.K.'s gross domestic product has injected selling pressure into most commodity markets Tuesday morning. February Comex gold last traded down $17.30 at $1,327.20 an ounce. Spot gold last traded down $6.70 at $1,328.50.
Reports overnight said the United Kingdom's gross domestic product declined by 0.5% in the fourth quarter of last year and fell by 1.7% year on year. This was much weaker than the 0.4% quarterly rise and 2.6% yearly rise the market place was expecting. European stock markets sold off on the U.K. GDP report. Commodity markets worldwide also saw fresh selling pressure on ideas of reduced demand, if other major countries also start to show economic contraction.
Commodity sector leader crude oil also sold off Tuesday morning and hit a fresh seven-week low. Bearish near-term technical signals are present in the crude oil market to suggest more downside price pressure in crude in the near term. That would be a further bearish underlying factor for thegold market
The U.S. dollar index is trading firmer Tuesday morning on a short-covering bounce from recent selling pressure. The index on Monday hit a fresh two-month low. The dollar index bears still have downside near-term technical momentum. If the U.S. dollar index resumes a downward path in the near term, look for gold prices to at least see more limited selling interest.
Reports overnight said Goldman Sachs now believes thegold marketcould top out in 2011 instead of its earlier forecast for a peak in 2012. The reason for the possible earlier peak in gold, says Goldman, is due to rising U.S. interest rates and the volatility in the interest rate markets.
U.S. economic data due for release Tuesday is heavy and includes the weekly Goldman Sachs chain store sales report, the weekly Johnson Redbook retail sales report, the S&P Case-Shiller home price index, the Richmond Federal Reserve business survey and the consumer confidence index. Tuesday is also the beginning of the two-day FOMC meeting and the president's state of the union speech is Tuesday evening. Most market watchers expect no market-sensitive surprises to come out of this FOMC meeting.
The London A.M. gold fixing was $1,326.00 versus the previous P.M. fixing of $1,343.00.
Technically, thegold marketbulls have faded badly recently and serious near-term technical damage has been inflicted as prices hit a fresh three-month low Tuesday morning. Prices are in a steep three-week-old downtrend on the daily bar chart. A bearish head-and-shoulders top reversal pattern is also playing out on the daily bar chart for February Comex gold.
Still,gold marketbulls have the overall longer-term technical advantage, as evidenced by a 10-year-old uptrend in place on the longer-term charts. However, the question on all gold traders' minds is, how deep will this latest downside price correction go? Nearby Comex gold futures prices could drop below $1,200.00 an ounce before any significant longer-term technical damage would start to be inflicted.
Gold bulls' next near-term upside technical objective is to produce a close above solid technical resistance at this week's high of $1,352.40. Bears' next near-term downside price objective is closing prices below psychological support at $1,300.00. First resistance is seen at $1,330.00 and then at the overnight high of $1,338.00. Support is seen at the overnight low of $1,321.90 and then at $1,317.40.
March silver futures last traded down 70.1 cents at $26.62 an ounce Tuesday morning. Silver prices are also in a three-week-old downtrend on the daily bar chart and hit another fresh two-month low overnight. Significant near-term chart damage has occurred in silver recently. Silver bulls also do still have the overall longer-term technical advantage.
The next downside price objective for the silver bears is closing prices below solid technical support at $25.00. Bulls' next upside price objective is producing a close above solid technical resistance at this week's high of $27.95 an ounce. First support is seen at $26.50 and then at $26.00. Next resistance is seen at the overnight high of $27.035 and then at $27.50.
By Jim Wyckoff of Kitco News; jwyckoff@kitco.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
