20 January 2011, 2:04 p.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/
(Kitco News) - Comex gold futures prices closed sharply lower, near the daily low and hit a fresh two-month low Thursday. A firmer U.S. dollar index and some commodity-market-bearish economic data coming out of China sunk the precious metals markets. February Comex gold last traded down $23.40 at $1,346.80 an ounce. Spot gold last traded down $23.40 at $1,347.50.
It was reported overnight that China's gross domestic product was up 9.8% in the fourth quarter, on a year-on-year basis. That was slightly higher than analysts had expected and heightened speculation China's monetary authorities will move sooner to tighten monetary policy to reduce domestic consumption. That's commodity-market-bearish. China has recently become the world's second-largest economy, overtaking a more-than-40-year number-two slot owned by Japan. The past couple years the commodity markets have paid very close attention to economic and political developments in China.
The U.S. dollar index rebounded Thursday and got a boost from a surprising drop in weekly U.S. jobless claims, reported Thursday morning. The dollar index had been under modest selling pressure early Thursday, but then pushed above unchanged following the jobless claims report. Still, the dollar index bears have gained downside near-term technical momentum recently. And if the U.S. dollar index continues on a downward path in the near term, look for gold prices to gain buying support from such.
As reported this morning, most gold traders are pondering at what point gold becomes a bargain-hunting buying opportunity. In recent months, significant price dips in gold have seen bargain hunters step in and then be rewarded by strong price rebounds. It always takes nerve for an investor or trader to step in and buy a dip in prices. However, recent price history shows that those buyers on the dips have been correct in their notions. Importantly, veteran market watchers know that the longer-term price trend in gold remains solidly up, and that every bull market always has its downside "corrections" that cause even the most ardent bulls to squirm just a bit.
News reports said Thursday that Russia will continue to add to its official reserves of gold. A Russian government official, speaking in London, said the Russian central bank's gold reserves will continue to rise, but did not say by how much. The official also said gold remains a risky market.
The London P.M. gold fix was $1,345.00 versus the previous P.M. fixing of $1,372.00.
Technically, February Comex gold futures bulls faded further Thursday, on a near-term basis. A bearish head-and-shoulders top reversal pattern is playing out on the daily bar chart. The gold market bulls do still have the overall longer-term technical advantage, but need to show fresh power soon to regain some near-term technical momentum and avoid more serious chart damage being inflicted. More near-term chart damage would be inflicted if prices closed at a bearish weekly low close on Friday.
Gold bulls' next near-term upside technical objective is to produce a close above solid technical resistance at this week's high of $1,378.90 in February futures. Bears' next near-term downside price objective is closing prices below solid technical support at the $1,330.00 area. First resistance is seen at $1,352.70 and then at $1,360.00. Support is seen at Thursday's low of $1,342.40 and then at $1,335.00. Wyckoff's Market Rating: 6.0.
March silver futures closed down 130.1 cents at $27.50 an ounce Thursday. Prices closed near the session low and hit a fresh seven-week low. A firmer U.S. dollar index and sharply lower crude oil prices pressured silver Thursday as the bears did gain some fresh downside technical momentum. Prices are in a three-week-old downtrend on the daily bar chart. A bearish weekly low close on Friday would produce more near-term chart damage.
The next downside price objective for the silver bears is closing prices below solid technical support at $26.50. Bulls' next upside price objective is producing a close above solid technical resistance at this week's high of $29.49 an ounce. First resistance is seen at $28.00 and then at $28.325. Next support is seen at Thursday's low of $27.375 and then at $27.00. Wyckoff's Market Rating: 6.0.
March N.Y. copper closed down 1,055 points at 426.35 cents Thursday. Prices closed nearer the session low and hit a fresh four-week low. No serious chart damage occurred Thursday, but some significant chart damage would likely occur if prices closed at a bearish weekly low close on Friday. Profit-taking pressure was featured again Thursday. A stronger U.S. dollar and sharply lower crude oil prices helped to pressure copper.
The copper bulls still have the overall near-term technical advantage, but did fade Thursday. Bulls' next upside objective is pushing and closing prices above solid technical resistance at early-January's all-time high of 449.80 cents. The next downside price objective for the bears is closing prices below solid technical support at the 410.00 cents. First resistance is seen at 430.00 and then at 432.50 cents. First support is seen at Thursday's low of 422.85 cents and then at 420.00 cents. Wyckoff's Market Rating: 6.5.
By Jim Wyckoff of Kitco News; jwyckoff@kitco.com
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