Gold Solidly Lower at 3-Week Low, As Bulls Losing Technical Control

Posted by Jim Wyckoff via Kitco

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Screen Shot 2014-03-20 at 6.25.38 AMGold prices are solidly lower and hit a three-week low in early trading Thursday, on follow-through selling pressure from strong losses suffered Wednesday. A rebound in the U.S. dollar index the past 24 hours and the latest FOMC news are helping to pressure the precious metals markets. Gold market bulls are quickly losing the near-term technical advantage they had enjoyed for several weeks. April gold was last down $17.80 at $1,323.60 an ounce. Spot gold was last quoted down $6.70 at $1,324.40. May Comex silver last traded down $0.621 at $20.215 an ounce.

The market place is still digesting the statement of the latest U.S. Federal Reserve Open Market Committee (FOMC) meeting that ended Wednesday afternoon, and Fed Chair Janet Yellen’s press conference afterward. As expected, the FOMC will continue on its “tapering” program, whereby monthly bond purchases are whittled down by $10 billion a month. What rattled some markets, including gold, was an indication the Fed could begin to raise U.S. interest rates sooner than many expect—sometime in 2015. Yellen is perceived to be fully in the dovish camp on monetary policy, and several markets were caught off guard by the FOMC statement and her remarks that were deemed less-than-fully-dovish.

Ed Note: For Traders & those looking to buy for investment at a less expensive price, read Jim’s read article Where are the Stops? Thursday, March 20: Gold and Silver

The U.S. dollar index has surged following the FOMC developments, which in turn has been a bearish underlying factor for commodity markets, including gold. U.S. Treasury market prices have also slumped (yields rising).

Asian and European stock markets sold off Thursday, following the lead of U.S. stock indexes Wednesday, in the wake of the FOMC statement and Yellen press conference.

The Ukraine-Russia matter has moved from an international crisis to a regional squabble, from the perspective of the market place. Gold is no longer drawing a safe-haven bid from this situation. German President Angela Merkel on Thursday called the Group of Eight (G-8) nations defunct—basically kicking Russia out of the club of the eight most economically powerful nations in the world. Any significant escalation of tensions between Ukraine and Russia would quickly put keen risk-aversion back into the market place.

U.S. economic data due for release Thursday includes the weekly jobless claims report, existing home sales, leading economic indicators, and the Philadelphia Fed business survey.

Wyckoff’s Daily Risk Rating: 5.0 (The Ukraine situation has for the moment de-escalated and has become a non-factor.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,327.00 versus the P.M. fixing of $1,338.00.

Technically, April gold futures have seen a 2.5-month-old uptrend on the daily bar chart at least temporarily negated with this week’s downside price action. The gold bulls have lost their near-term technical advantage. Bulls’ next upside near-term price breakout objective is to produce a close above technical resistance at $1,360.00. Bears’ next near-term downside breakout price objective is closing prices below technical support at $1,300.00. First resistance is seen at the overnight high of $1,335.30 and then at $1,340.00. First support is seen at the overnight low of $1,321.30 and then at $1,310.00.  

May silver futures bears have the near-term technical advantage as prices Thursday hit a fresh six-week low. A four-week-old downtrend is in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $21.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $20.00. First resistance is seen at $20.50 and then at the overnight high of $20.73. Next support is seen at $20.00 and then at $19.75.

By Jim Wyckoff, contributing to Kitco News;
Follow me on Twitter @jimwyckoff