Gold, Silver See New Bearish Element: Slumping Crude Oil Prices

(Kitco News) - Gold and silver futures markets were ending the U.S. day session lower Thursday, as their price downdrafts continue. Gold notched a five-week low today and is closing in on the key $1,200.00 support level. Silver scored a six-week low and is poised to drop below solid chart support at $17.00. Plunging crude oil prices have sent bearish shudders throughout the entire raw commodity sector. April Comex gold was last down $5.40 an ounce at $1,204.00. May Comex silver was last down $0.243 at $17.055 an ounce.

A feature in the world marketplace at present is the sharp drop in crude oil prices the past two days—the steepest decline in months. Nymex crude oil futures slumped to a three-month low of $48.79 a barrel Thursday. Price action in crude Wednesday scored a big and bearish downside “breakout” from a sideways and choppy trading range that had been in place on the daily bar chart. That significantly bearish chart action in crude oil Wednesday suggests more downside price potential in the near term. Given that crude oil prices are arguably the leader of the raw commodity sector, the now-bearish chart posture for oil is also a big negative for the raw commodity sector.

The other key outside market on Thursday saw the U.S. dollar index weaker on a corrective pullback from recent good gains. The dollar index is still in a price uptrend and has benefitted recently on increasing ideas of a U.S. interest rate hike coming next week. The appreciating greenback recently is also bearish for most raw commodity markets.

Arguably the most important economic report of the week is on Friday--the U.S. employment report for February from the Labor Department. The key non-farm payrolls component of the report is forecast to come in at up around 220,000 workers. That number has been revised up by about 30,000 after the strong ADP report on Wednesday.

The marketplace is also looking forward to next week’s FOMC meeting, at which time the Federal Reserve is fully expected to raise U.S. interest rates by 0.25%.

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

Technically, April gold futures prices closed near mid-range today. The gold bears have the overall near-term technical advantage after the recent downdraft in prices. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,227.40. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,200.00. First resistance is seen at today’s high of $1,208.90 and then at $1,218.50. First support is seen at $1,200.00 and then at $1,190.00. Wyckoff's Market Rating: 4.0

May silver futures prices closed near the session low today and hit a six-week low. The silver market bears have the overall near-term technical advantage. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.57 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at today’s high of $17.31 and then at $17.57. Next support is seen at $17.00 and then at $16.70. Wyckoff's Market Rating: 3.5.

May N.Y. copper closed down 195 points at 258.10 cents today. Prices closed near mid-range and hit another six-week low today. The copper bulls have lost their overall near-term technical advantage. Prices are in a three-week-old downtrend. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at this week’s high of 270.95 cents. The next downside price objective for the bears is closing prices below solid technical support at 250.00 cents. First resistance is seen at today’s high of 260.00 cents and then at 263.45 cents. First support is seen at today’s low of 255.85 and then at 252.50 cents. Wyckoff's Market Rating: 5.0.