Gold Sees Modest Short-Covering Bounce In A Bear Market

(Kitco News) - Gold prices were ending the U.S. day session a bit firmer on some more short-covering in the futures market and perceived bargain-hunting in the cash market after hitting a 10-month low late last week. The precious metals bulls are still spooked by the recent powerful rally in the U.S. dollar index that last week hit a 13-year high. February Comex gold was last up $4.60 an ounce at $1,141.90. March Comex silver was last down $0.14 at $16.075 an ounce.

Global markets were subdued Monday on this week before the Christmas holiday. Trading in many markets is likely to get quieter as the week progresses. Many world stock markets are trading near multi-year and/or record highs and it would not be surprising to see those stock indexes at least pause, if not see some profit-taking, into the end of the year. Any significant pullbacks in world stock markets would be a bullish development for the competing asset class, safe-haven gold.

World bond markets were also quieter to start the trading week and may be stabilizing after several weeks of rising yields. The U.S. 10-year Treasury yield hit 2.6% late last week. After trading in negative territory just a few months ago, the German 10-year bond is fetching a yield of around 0.3%. Rising bond yields worldwide should also at some point start to support the precious metals markets, on price-inflation concerns.

The key “outside markets” on Monday saw the U.S. dollar index trade slightly lower on a corrective pullback after scoring solid gains and hitting a 13-year high late last week. Nymex crude oil prices were firmer. The oil bulls appear to be tired after spiking prices to a 16-month high last week. There are now technical clues the crude oil market has put in a near-term top.

(Note: Follow me on Twitter--@jimwyckoff--for breaking market news.)

Technically, February gold futures prices closed nearer the session high. The gold bears still have the solid overall near-term technical advantage. There are still no early clues of a market bottom. Prices are in a six-month-old downtrend on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,168.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,100.00. First resistance is seen at $1,146.00 and then at $1,150.00. First support is seen at today’s low of $1,135.50 and then at last week’s low of $1,124.30. Wyckoff's Market Rating: 1.5

March silver futures prices closed nearer the session low. Prices late last week hit an eight-month low. The silver market bears have the solid overall near-term technical advantage, to suggest still more downside pressure is coming in the near term. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.50. First resistance is seen at $16.33 and then at $16.50. Next support is seen at last week’s low of $15.925 and then at $15.75. Wyckoff's Market Rating: 1.5.

March N.Y. copper closed down 665 points at 249.80 cents today. Prices closed nearer the session low and hit a four-week low today. More profit taking was featured. The copper bulls still have the overall near-term technical advantage but are now fading, to suggest a market top is in place. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 265.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 228.00 cents. First resistance is seen at today’s high of 256.00 cents and then at 260.00 cents. First support is seen at today’s low of 247.75 cents and then at 245.00 cents. Wyckoff's Market Rating: 6.0.

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