Gold Ends Steady-Weak After Tuesday’s Big Downdraft

(Kitco News) - Gold prices ended the U.S. day session near unchanged to slightly lower Wednesday, on some mild follow-through pressure from the strong losses absorbed Tuesday. Prices hit a 3.5-month low again today. Near-term technical damage has been inflicted to suggest prices will continue to drift sideways to lower for at least the near term. December Comex gold was last down $0.10 an ounce at $1,270.00. December Comex silver was last up $0.05 at $17.79 an ounce.

Gold prices erased moderate early gains when it was reported the September U.S. non-manufacturing purchasing managers index (PMI) rose to its highest level in a year, with a reading of 57.1 versus 51.4 in August. A number of 53.0 was expected by the marketplace. This news falls into the camp of the U.S. monetary policy hawks, who want a U.S. interest rate increase sooner rather than later. Tighter monetary policies from the world's major central banks and even talk of such has been bearish for the precious metals markets.

The September U.S. ADP national employment report was released Wednesday morning and showed a jobs rise of 154,000, which was a bit less than market expectations. This report is a precursor to Friday’s U.S. jobs report, which is arguably the most important report of the month. The key non-farm payrolls number is expected to be up by 170,000 in September.

Gold market watchers are still buzzing about the big sell-off Tuesday, in which prices fell around $40.00 an ounce. Some wonder if the downdraft had something to do with the big German bank, Deutsche Bank, being in a liquidity crunch and possibly selling its gold holdings. The drop in gold was generally blamed on a higher U.S. dollar index and some hawkish Fed speak Tuesday. However, the USDX was only moderately higher on the day and the Fed’s Jeff Lacker’s comments were not anything new. Others speculate that big fund players who were long gold futures contracts capitulated after seeing gold prices trend sideways to lower for the past three months.

There is ongoing speculation among traders and investors regarding when the U.S. Federal Reserve will raise interest rates. This on-again, off-again rate-hike talk was in the on-again mode Tuesday. There was also a report Tuesday that the European Central Bank may start to taper its bond-buying program down the road.

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Technically, December gold futures prices closed nearer the session low today. Serious near-term technical damage has been inflicted with Tuesday’s big downdraft. The gold bears have gained the overall near-term technical advantage. Prices have been trending lower for three months. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,250.00. First resistance is seen at today’s high of $1,279.40 and then at $1,285.00. First support is seen at today’s low of $1,264.10 and then at $1,259.00. Wyckoff’s Market Rating: 4.0

December silver futures prices closed nearer the session low and hit another three-month low today. The silver market bears have the overall near-term technical advantage. Prices have been trending lower for three months. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $19.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.00. First resistance is seen at today’s high of $18.04 and then at $18.25. Next support is seen at today’s low of $17.585 and then at $17.25. Wyckoff's Market Rating: 4.0.

December N.Y. copper closed up 10 points at 216.80 cents today. Prices closed near mid-range today. The copper bulls have the slight overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 226.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 212.00 cents. First resistance is seen at today’s high of 218.15 cents and then at 219.60 cents. First support is seen at today’s low of $2.1585 and then at 213.90 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com