(Kitco News) - Gold prices ended the U.S. day session near steady in choppy, two-sided trade Wednesday. A sharp drop in the U.S. dollar index did little to help the precious metals bulls on this day, as crude oil prices lost their early gains and are trading near this week’s nearly seven-year low. February Comex gold was last up $1.00 at $1,076.40 an ounce. March Comex silver was last up $0.059 at $14.175 an ounce.
It was a quieter news day Wednesday, which allowed the chart-based sellers to dominate, and the technicals still firmly favor the precious metals bears.
The crude oil market is in keener focus this week as Nymex futures prices on Tuesday fell to a nearly seven-year low below $37.00 a barrel. Oil prices saw a mild short-covering bounce earlier Wednesday, but then sold off as the session progressed. The slumping oil market is also keeping buyers in other raw commodity futures markets very timid, including the precious metals. World stock markets are also jittery over the steep decline in oil prices. The next downside target for the energized crude oil market bears is the 2009 low of $33.20 a barrel. Most raw commodity markets won’t begin to see their own price recoveries until crude oil leads the way.
Next week’s FOMC meeting is coming more into focus. The majority of market watchers believe the Federal Reserve will raise U.S. interest rates for the first time in nine years on December 16.
In overnight news, China’s central bank lowered the yuan’s peg against the U.S. dollar to its lowest level in four years, reports said. The move by the People’s Bank of China is meant to create better demand for China’s goods on the world market. Another report from China Wednesday said producer prices were down 5.9% from year-ago levels. Consumer prices were up 1.5% in the same period. The figures were just a bit more upbeat that forecasters expected, but still underscore that price deflation worldwide remains a serious concern.
Veteran traders and investors are noticing growing reports of strains in the world low-grade (junk) bond markets. The problems in junk bonds are said to be as bad as what was seen during the height of the world financial crisis in 2008. The energy sector is really feeling the credit pain given the sharp drop in crude oil prices. This matter bears monitoring in the weeks and months ahead. A junk bond crisis could spill over into a general credit crisis that impacts all markets. Such could also prompt some significant safe-haven demand for gold, as a serious worldwide credit crunch would negatively impact world stock markets, too.
Technically, February gold futures prices closed near mid-range. Gold bears still have the solid overall near-term technical advantage. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,100.00. Bears' next near-term downside price breakout objective is pushing prices below solid longer-term technical support at last week’s contract low of 1,045.40. First resistance is seen at this week’s high of $1,086.10 and then at last week’s high of $1,088.30. First support is seen at today’s low of $1,068.70 and then at this week’s low of $1,065.00. Wyckoff’s Market Rating: 2.0
March silver futures prices closed near mid-range and saw tepid short covering. The silver market bears have the firm overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $14.64 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the contract low of $13.805. First resistance is seen at today’s high of $14.335 and then at $14.50. Next support is seen at this week’s low of $14.065 and then at $14.00. Wyckoff's Market Rating: 2.0.
March N.Y. copper closed up 150 points at 206.90 cents today. Prices closed nearer the session low. Copper bears have the firm overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 220.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 200.00 cents. First resistance is seen at 2100.00 cents and then at 213.45 cents. First support is seen at this week’s low of 203.35 cents and then at last week’s low of 202.55 cents. Wyckoff's Market Rating: 2.0.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff
