A.M. Kitco Metals Roundup: Gold Hits Another Nearly 3-Yr. Low; Prices Down 30% This Year

Friday June 28, 2013 8:00 AM

(Kitco News) - Gold prices are moderately lower in early U.S. trading Friday after hitting a new nearly three-year low of $1,179.40 in the August Comex futures overnight. August gold was last down $9.20 at $1,202.30 an ounce. Spot gold was last quoted up $1.40 at $1,203.25. July Comex silver last traded up $0.227 at $18.76 an ounce.

The focus of virtually the entire market place this week has been on the gold market and the beating it has taken this year. On this last trading day of the month and of the quarter, gold prices are down around 30% in value this year and down around 25% in the second quarter alone. Reports say that gold exchange traded funds have shed around 22% of their value this year and have lost 16% of their total funding in this quarter. And unlike the big sell off in gold that occurred in April, this latest downdraft has not seen buyers of physical gold step up to do some bargain hunting. The gold bulls can point to the fact that the market is now technically oversold and due for at least a corrective bounce.

Gold and the raw commodity sector have been on the defensive for the past week, following last week's hawkishly perceived FOMC meeting of the U.S. Federal Reserve. The market place read that meeting as suggesting the Fed will start to "taper" its monthly bond buying (quantitative easing) by the end of this year, and the program could be finished by this time in 2014. However, this week several U.S. Federal Reserve officials and even other major world central bank officials have tried to assuage the market place with more dovish remarks on their monetary policies-but with limited success. More U.S. Fed officials are set to give speeches on Friday, which will be closely scrutinized by the market place.

For the raw commodity sector to come out of its bearish funk, gold prices will have to at least stabilize and crude oil prices will have to push above the psychological resistance level of $100 a barrel. Crude oil prices this week have started to rally after recent sideways and choppy trading.

It will be an extra important trading week next week. China manufacturing data is due out Monday and the U.S. employment report is due out next Friday.

Asian stocks were firmer overnight and European stocks were mixed Friday in uneventful trading. Traders and investors are awaiting next week's batch of economic data. Book-squaring at the end of the month and the quarter are also featured Friday.

The Bank of Japan's deputy governor said Friday the past three months of aggressive BOJ easing measures have been effective and he said the need for further monetary stimulus is not necessary. The deputy governor also said the BOJ is very concerned about the present financial liquidity problems that have surfaced in China.

The U.S. dollar index is near steady Friday morning, on some mild profit taking after hitting a three-week high Thursday. The greenback bulls still have technical momentum on their side, which is a bearish underlying factor for the precious metals markets.

U.S. economic data due for release Friday includes the ISM Chicago business survey and the University of Michigan consumer sentiment survey.

The London A.M. gold fix is $1,203.25 versus the previous London P.M. fixing of $1,232.75.

Technically, the gold market bears remain in strong near-term technical command. The next major, longer-term downside price targets are $1,100 and then at $1,027 for nearby Comex futures. The $1,088 price level for nearby Comex gold futures marks a 50% Fibonacci retracement level of the up-trending price move from the 2001 low to the 2011 record high. If that key technical level is breached on the downside, it would be an ominous chart development. August gold futures prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls' next upside near-term price objective is to produce a close above technical resistance at $1,250.00. Bears' next near-term downside breakout price objective is closing prices below psychological and longer-term trend-line support at $1,100.00. First resistance is seen at the overnight high of $1,211.40 and then at $1,225.00. First support is seen at the overnight low of $1,179.40 and then at $1,150.00.

Silver bears have the strong overall near-term technical advantage as prices dipped to another nearly three-year low overnight. Prices are in an overall eight-month-old downtrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above major psychological resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $17.50. First resistance is seen at $19.00 and then at Wednesday's high of $19.58. Next support is seen at the overnight low of $18.185 and then at $18.00.

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Read the latest news in gold and precious metals markets at Kitco News.

By Jim Wyckoff, contributing to Kitco News;

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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