Price erosion continues in gold, silver as crude oil crumbles, greenback gains

(Kitco News) - Gold is under strong selling pressure and silver is modestly down in midday U.S. trading Wednesday. Gold hit an 8.5-month low and silver a two-year low today. The metals bulls continue to run for cover amid a stronger U.S. dollar index that hit a 20-year high today, and by crude oil prices that are down around $10 a barrel in just two trading days so far this week. The near-term technical charts for gold and silver are also fully bearish, which is prompting the chart-based traders to play the short sides of the futures markets. August gold futures were last down $25.00 at $1,739.50. September Comex silver futures were last down $0.141 at $18.98 an ounce.

U.S. stock indexes are weaker at midday. Recession and inflation worries are still tamping down trader and investor risk appetite. It appears recession fears are trumping inflation fears at present, evidenced by the major sell offs in many raw commodity futures markets Tuesday, led by the big drop in Nymex crude oil futures. Metals traders are also focused on the bearish consumer and commercial demand prospects if a U.S. and/or global economic recession sets in.

Traders are awaiting this afternoon’s release of the minutes from the last FOMC meeting of the Federal Reserve.

The U.S. data point of the week is Friday’s employment situation report for June. The key non-farm payrolls number is expected to come in up 250,000 compared to the 390,000 rise in the May report.

The key outside markets today see Nymex crude oil prices solidly lower and trading around $95.50 a barrel. The U.S. dollar index is solidly up and hit a 20-year high today. The yield on the 10-year U.S. Treasury note is fetching 2.888%. The 2-year and 10-year note at one point today inverted (meaning the 2-year yield was higher than the 10-year), which is another clue that the U.S. economy is teetering on recession. 

Technically, August gold futures prices hit an 8.5-month low today. Bears have the solid overall near-term technical advantage and have momentum. Prices are in a four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at $1,750.00 and then at today’s high of $1,771.50. First support is seen at $1,725.00 and then at $1,700.00. Wyckoff's Market Rating: 1.5.

September silver futures prices hit another two-year low today. The silver bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the May low of $20.525 an ounce. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at today’s high of $19.325 and then at $19.85. Next support is seen at today’s low of $18.705 and then at $18.50. Wyckoff's Market Rating: 1.0.

July N.Y. copper closed down 395 points at 338.55 cents today. Prices closed nearer the session low today and hit another 1.5-year low today. The copper bears have the solid overall near-term technical advantage. A steep four-week-old price downtrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at last week’s high of 384.30 cents. The next downside price objective for the bears is closing prices below solid technical support at 325.00 cents. First resistance is seen at today’s high of 346.35 cents and then at 350.00 cents. First support is seen at today’s low of 337.00 cents and then at 330.00 cents. Wyckoff's Market Rating: 1.0.

By Jim Wyckoff

For Kitco News

 jwyckoff@kitco.com

www.kitco.com