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A.M. Kitco Metals Roundup: Comex Silver Prices Again Reeling; Gold Drops Below $1,500.00

(Kitco News) - Comex silver futures prices are again leading a big downside move in the precious metals markets Thursday. Silver hit a fresh 2.5-month low of $32.30 an ounce overnight, while gold futures dropped well below the $1,500.00 level. Sharply lower crude oil prices and a firmer U.S. dollar index are major factors producing downside price pressure in the commodity markets Thursday. June gold last traded down $15.70 at $1,485.70. Spot gold last traded down $15.10 an ounce at $1,486.50. July Comex silver last traded down $2.31 at $33.20 an ounce.

Strong follow-through selling pressure is seen in crude oil and the precious metals markets Thursday morning, following solid losses posted on Wednesday. Once again, the commodity world is spooked amid a move by traders to "get out when in doubt." The latest wave of commodity market selling hit when high volatility in the crude oil market at midday Wednesday forced the New York futures market to temporarily halt trading, which is a rarity. Daily trading limits were raised for the liquid energies and futures trading did resume in short order. But the psychological damage to the commodity markets was already done.

News overnight that China's central bank has raised domestic bank reserve requirements another 50 basis points further rattled the commodity market bulls. This is the fifth tightening move by China this year as it works to fight inflation. Commodity markets extended declines on the news as tighter bank reserve requirements make it harder for Chinese importers to free up lines of credit. As reported Wednesday, China's consumer price index in April rose 5.3%, year-on-year, which was slightly higher than expected.

Crude oil prices are trading sharply lower Thursday morning and hit a low of $95.25 overnight, basis the nearby June Nymex futures contract. Official reports have surfaced this week that energy demand has been reduced by the recent high energy prices. Combined with world economic growth that is still deemed tepid, crude oil prices have taken a big downside hit. Crude oil is still the leader in the raw commodity market sector. If crude oil prices continue to erode, many other commodity markets will do the same, or at least see the upside price potential very limited.

The U.S. dollar index is trading higher Thursday morning, on follow-through strength from good gains posted Wednesday. The dollar index bulls have gained some upside technical momentum to begin to suggest that at least a near-term market low is in place. Any sustained recovery in the U.S. dollar index would be a bearish development for the precious metals markets. The dollar index has received some help recently from the ongoing

European Union sovereign debt saga. Greece is the nation moved to the front burner this time. Ratings agency downgrades for Greece's debt and news reports Greece may even pull out of the EU have dented the Euro currency recently.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the producer price index, retail sales and manufacturing and trade inventories. Fed Chairman Bernanke does speak in front of a Senate panel Thursday.

The London A.M. gold fixing is $1,488.25 versus the previous P.M. fixing of $1,508.00.

Technically, June Comex gold futures on Wednesday scored a bearish "outside day" down on the daily bar chart--whereby Wednesday's high was higher and low was lower than Tuesday's trading range, with a lower close and have seen solid follow-through selling pressure Thursday morning. After showing a good rebound for three days in a row, following late last week's selling pressure, the gold market bulls have again faded. This week's trading action is extra important, technically. A close at or near the weekly high on Friday would be significantly bullish to suggest the uptrend on the daily chart being restarted. However, a close Friday at or near the weekly low would be significantly bearish to suggest still more downside price pressure in the near term. Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at $1,550.00. Bears' next near-term downside price objective is closing prices below solid technical support at last week's low of $1,462.50. First resistance is seen at $1,500.00 and then at the overnight high of $1,506.50. First support is seen at the overnight low of $1,477.60 and then at $1,470.00.

July Comex silver futures prices hit a fresh 2.5-month low overnight to score fresh, serious near-term technical damage. The bulls had shown some good rebounding power in recent days, but have faded badly. Like gold, how silver market prices end the trading week this Friday (near the weekly high or near the weekly low) will be very technically significant regarding price action in the coming weeks. At present, it looks like the bears will win this week's key battle. The next downside price breakout objective for the bears is closing prices below major psychological support at $30.00. Bulls' next upside price objective is producing a close above solid technical resistance at $38.00 an ounce. First resistance is seen at $34.00 and then at $34.50. Next support is seen at $33.00, at $32.50, and then at the overnight low of $32.30.

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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.

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