Sell-Off In U.S. Stock Market Lures Buyers Back To Gold

(Kitco News) - Gold prices were ending the U.S. day session with slight gains and erased earlier losses. A solid down day for U.S. stock indexes helped to lift the gold market back into positive territory on the day. Both gold and silver markets dropped to three-week lows in overnight trading. December Comex gold was last up $1.10 an ounce at $1,279.40. December Comex silver was last down $0.011 at $16.95 an ounce.

Recent rallies in world stock markets to record or multi-year highs had been keeping general trader/investor buying interest focused on the equities and away from the precious metals. If the stock markets show some sustained weakness (and it can certainly be argued the very mature bull market runs in stocks are due for at least a decent corrective pullback) then gold and silver prices would benefit significantly.

A rise in U.S. government bond yields to a five-month high Wednesday (lower prices) also helped to sink the U.S. stock market. While rising bond yields fall into the camp of the monetary policy hawks, it can be argued that rising inflationary pressure that the rising bond yields suggest is also a longer-term bullish development for the precious metals markets. Precious metals have historically been assets used as hedges against rising inflation.

U.S. economic data released Wednesday included durable goods orders and new residential sales. Both reports strongly beat expectations on the upside, which did work to limit buying interest in the gold and silver markets, and helped sink U.S. Treasury prices.

The key “outside markets” on Wednesday saw the U.S. dollar index weaker. Meantime, Nymex crude oil futures prices were also lower and trading just below $52.00 a barrel.

The key markets event of the week occurs on Thursday, when the European Central Bank holds its regular monetary policy meeting. Many expect the ECB to announce more details on the winding down of its bond-buying program.

Technically, December gold futures prices closed nearer the session high. Bulls and bears are on a level overall near-term technical playing field, but the bears still have some momentum on their side. Bulls need to show some fresh power soon to avoid more serious technical damage being inflicted. 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 the October low of $1,262.80. First resistance is seen at this week’s high of $1,285.30 and then at $1,292.90. First support is seen at today’s low of $1,272.00 and then at $1,262.80. Wyckoff's Market Rating: 5.0

December silver futures prices closed near mid-range today. The silver bulls and bears are now on a level overall near-term technical playing field, but the bears have some momentum on their side. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the October low of $16.345. First resistance is seen at this week’s high of $17.17 and then at $17.315. Next support is seen at today’s low of $16.81 and then at $16.50. Wyckoff's Market Rating: 5.0.

December N.Y. copper closed down 180 points at 318.05 cents today. Prices closed near mid-range and saw profit taking. The copper bulls have the firm overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 330.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 300.00 cents. First resistance is seen at today’s high of 320.30 cents and then at this week’s high of 323.90 cents. First support is seen at today’s low of 314.40 cents and then at last week’s low of 311.20 cents. Wyckoff's Market Rating: 7.0.