Gold Slammed To 5-Mo. Low On Rising Investor Optimism, Technical Selling

(Kitco News) - Gold prices ended a historic trading week sharply lower and careened to a five-month low Friday. A generally upbeat trader and investor psychology late this week (the "Trump rally") worked against the safe-haven gold market. Gold prices finished down more than $110.00 an ounce from the early Wednesday spike high to $1,338.30, basis December Comex futures. Silver was hit hard, too, dropping by nearly $1.50 an ounce and hitting a four-week low. Both gold and silver markets closed at technically bearish weekly low closes Friday. December gold was last down $43.70 an ounce at $1,222.70. December silver was down $1.467 at $17.27 an ounce.

Sell stop orders were triggered in the gold and silver futures markets when prices dropped below key chart support levels, to intensify the price downdrafts.

A better-than-expected University of Michigan consumer sentiment survey report late Friday morning also lent notions to an improving U.S. economy. This week's markets' price action suggests the Federal Reserve could go ahead and raise U.S. interest rates at its December meeting. The past several years have seen the raw commodity sector, including the precious metals, benefit from a very easy U.S. monetary policy. The fact that scenario appears to be coming to an end likely prompted some of the selling pressure in gold and silver markets.

The “Trump rally” in world stock markets late this week and ideas world economies will pick up some momentum in the coming months are also working against the safe-haven gold market. Gold prices sold off smartly after their mid-week spike higher in the immediate aftermath of the surprise Donald Trump U.S. presidential race win. The world marketplace has quickly adopted a “risk-on” attitude after being spooked Wednesday.

A feature in the world markets this week was soaring copper prices, on ideas a Trump administration would mean more demand for the red industrial metal due to increased infrastructure spending. Copper prices hit a 16-month high late this week and have risen by 30 cents a pound just this week. “Dr. Copper,” as the metal is known, is hinting that world economic growth is picking up speed. This element, should it indeed play out, will work to the benefit of gold and silver bulls in the coming months.

Another focus of the marketplace late this week is rising world bond market yields. In fact, looking at the charts there are very early indications that suggest a major bear market setting in for bonds--after prices had been in a bull market run for many years. Many market watchers believe a Trump administration will produce generally higher interest rates worldwide, due to deficit spending and infrastructure rebuilding. That also suggests rising inflation, which is also ultimately bullish for hard assets like the precious metals.

The key “outside markets” on Friday were also in a bearish posture for the precious metals markets. The U.S. dollar was higher and hit a nine-month high. Meantime, Nymex crude oil prices were solidly down and hit a 13-week low as reports Friday cast doubt on OPEC’s ability to cut its crude oil production, despite its stated intention to do so earlier this autumn.

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Technically, December gold futures bears have gained the overall near-term technical advantage. A four-week-old uptrend on the daily bar chart has been soundly negated. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,243.20. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00. First resistance is seen at $1,230.00 and then at $1,240.00. First support is seen at today’s low of $1,218.70 and then at 1,210.00. Wyckoff’s Market Rating: 3.5

December silver bears now have the slight near-term technical advantage. Silver bulls’ next upside price breakout objective is closing futures 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 $16.00. First resistance is at $17.50 and then at $17.75. Next support is seen at today’s low of $17.17 and then at $17.00. Wyckoff's Market Rating: 4.5.

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