Markets

A.M. Kitco Metals Roundup: Gold Weaker On Corrective Pullback From Late Rally Monday

Tuesday May 21, 2013 8:34 AM

(Kitco News) - Comex gold futures prices are moderately lower in early U.S. trading Tuesday. The market is seeing a downside technical correction following a surge higher in late trading Monday. The stronger U.S. dollar index Tuesday is also a negative for the precious metals markets. Comex June gold last traded down $11.90 at $1,371.80 an ounce. Spot gold was last quoted down $22.10 at $1,372.50. July Comex silver last traded down $0.332 at $22.25 an ounce.

While the gold and silver bears are still in control of their markets, the sharp rebounds in prices seen in late trading Monday are a clue these markets have bottomed out or are close to doing so. There has been a lot of bearish talk directed at gold and silver the past few weeks, including the big outflow of investor monies from gold-backed exchange-traded funds. However, it's the market's job to very quickly factor into price structure all known fundamental events. Such suggests it would take fresh, bearish fundamental news to set off gold prices on another solid leg lower.

The market place is awaiting Federal Reserve Chairman Ben Bernanke's speech on the economy and monetary policy before the Congress on Wednesday. The Fed's FOMC minutes are also due out Wednesday afternoon. Traders and investors will closely scrutinize Bernanke's remarks and the FOMC minutes for clues on the U.S. central bank's potential course of monetary policy in the coming weeks and months. There is a growing belief in the market place that the Fed is aiming to wind down its quantitative easing program (QE3) sooner rather than later. The term presently bandied about is "tapering" of the Fed's massive monthly bond-buying program. However, there is no clear consensus among market and Fed watchers regarding what the Fed will do with its monetary policy.

On Thursday, there will be key manufacturing data out of China released, which will also garner close market attention.

U.S. economic data due for release Tuesday is again light and includes the weekly Goldman Sachs and Johnson Redbook retail sales reports.

The London A.M. gold fixing is $1,378.75 versus the previous P.M. fixing of $1,354.75.

Technically, June gold futures closed prices closed nearer the session high Monday and hit a fresh four-week low early on. Prices scored a bullish "outside day" up on the daily bar chart Monday. The gold bears are still in near-term technical control. Prices are in a 7.5-month-old downtrend on the daily bar chart. The gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,400.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the April low of $1,321.50. First resistance is seen at $1,400.00 and then at $1,410.00. First support is seen at the overnight low of $1,369.90 and then at $1,350.00.

July silver futures prices closed nearer the session high and scored a big "outside day" up on the daily bar chart Monday. Monday's price action also produced a bullish selling "exhaustion tail" on the daily bar chart, whereby prices dropped to a 2.5-year low and then the sellers suddenly became exhausted at the lower price levels and then rallied to close nearer the daily high. Monday's price action, including the bullish exhaustion tail, is a clue that the silver market has put in a near-term bottom. Silver bears still have the overall near-term technical advantage. Prices are still in a 7.5-month-old downtrend on the daily bar chart. Bulls' next upside price breakout objective is closing prices above solid technical resistance at last week's high of $23.84 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at Monday's low of $20.25. First resistance is seen at the overnight high of $22.91 and then at $23.00. Next support is seen at the overnight low of $22.20 and then at $22.00.

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

By Jim Wyckoff, contributing to Kitco News; 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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