Gold, silver bulls staggered by near-term knock-down punches

(Kitco News) - Gold and silver prices are sharply lower in midday U.S. trading Wednesday. Gold hit a two-month low and silver fell to a seven-week low. Gold and silver have seen their near-term price uptrends (on the daily chart) negated this week. A rallying U.S. dollar index that hit a two-month high today and a recovery in global stock markets from steep losses early this week are bearish elements for the precious metals markets. December gold futures were last down $38.00 at $1,869.40 and December Comex silver was last down $1.383 at $23.14 an ounce.

Gold and silver bulls are confounded this week. Their markets sold off, along with the global stock markets, on Monday, but then also see selling pressure at mid-week when the world stock indexes are recovering. It appears the safe-haven metals need a new fundamental spark to jumpstart upside price action. Don’t be surprised if such occurs sooner rather than later.

Importantly, December gold futures fell below the last “reaction low” in the near-term price uptrend (daily chart) that had been in place since March (the August low of $1,874.20), to negate it. Now, prices are in a six-week-old downtrend on the daily bar chart. While the technical news for gold is grim on a near-term (daily chart) basis, the longer-term (weekly chart) technical posture remains friendly as prices are still in a two-year-old uptrend. On the weekly continuation chart for nearby Comex gold futures, prices would have to drop below $1,700 to produce serious longer-term chart damage, including negating the uptrend on the weekly chart.

Silver this week has shed almost $4 an ounce. Silver prices are now in a six-week-old downtrend on the daily bar chart. The near-term technical posture for silver has deteriorated rapidly, and some longer-term chart damage has also occurred as prices this week produced a bearish downside gap. There is not much chart support that shows up for silver until prices reach major psychological support at $20.00. Still, silver bulls can argue a price uptrend is still in place on the weekly chart—but the bulls need to stop the bleeding very soon to keep that uptrend alive.

Global stock markets were mostly firmer overnight. U.S. stock indexes are weaker at midday today. At mid-week there is a bit less risk aversion in the global marketplace compared to Monday. The U.S. House of Representatives late Tuesday passed a short-term funding bill that will keep the federal government running until early December. However, it’s still unlikely the Congress and President Trump will get a new, second financial stimulus package for Americans out the door before the November elections. 

Reports overnight said a U.K. scientist has warned a full second lockdown is coming, as Prime Minister Boris Johnson considers banning household visits and other restrictions. Johnson warned the U.K. faces a long, hard winter of lockdowns.

Meantime, the Euro zone composite purchasing managers index (PMI) for September came in at 50.1 vs 51.9 in August. Better growth in manufacturing led by Germany was offset by a renewed downturn in the service sector as a result of Covid-19 restrictions. In the U.S., the September Markit flash services PMI came in at 54.6 and the manufacturing PMI came in at 53.5. A reading above 50.0 suggests growth in the sector.

The other important outside market today sees Nymex crude oil prices modeslty firmer and trading around $40.00. Meantime, the yield on the U.S. Treasury 10-year note is trading around 0.68% today.

Technically, The gold bulls still have the slight overall near-term technical advantage but a six-week-old downtrend is now in place on the daily bar chart and bears have momentum. Bulls’ next upside price objective is to produce a close in October futures above solid resistance at Tuesday’s high of $1,925.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,885.00 and then at $1,900.00. First support is seen at today’s low of $1,865.00 and then at $1,850.00. Wyckoff's Market Rating: 5.5

December silver futures bulls have lost their overall near-term technical advantage this week as a five-month-old price uptrend that was in place on the daily bar chart has been at least temporarily negated. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $24.00 and then at today’s high of $24.62. Next support is seen at today’s low of $23.04 and then at $22.50. Wyckoff's Market Rating: 5.0.

December N.Y. copper closed down 640 points at 299.75 cents today. Prices closed nearer the session low today. The copper bulls still have the firm overall near-term technical advantage as prices are in a six-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 312.10 cents. The next downside price objective for the bears is closing prices below solid technical support at the August low of 279.60 cents. First resistance is seen at 305.00 cents and then at today’s high of 307.25 cents. First support is seen at today’s low of 298.00 cents and then at of 295.35 cents. Wyckoff's Market Rating: 7.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com