M. Kitco Metals Roundup: Comex Gold, Silver End Sharply Lower; Silver Again Leads and Suffers Near-T

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.04 May 2011, 01:45 p.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/
(Kitco News) - Comex gold and silver futures prices finished the day session sharply lower Wednesday, on strong follow-through selling pressure from solid losses posted on Tuesday. Silver prices dropped to a fresh four-week low and are down over $10.00 an ounce, or 20%, in value, in just over a week's time. The silver bulls have faded badly and near-term technical damage has occurred in that market, which is adding selling pressure to the gold market. Weaker crude oil prices again Wednesday also prompted selling pressure in the precious metals. June gold last traded down $26.40 at $1,514.10. Spot gold last traded down $23.30 an ounce at $1,514.25. July Comex silver last traded down $3.14 at $39.45 an ounce.
There were media reports that some big hedge funds have been liquidating their long gold and silver trading positions recently. That could have put some additional downside price pressure on the precious metals markets Wednesday.
It's important for traders and investors to understand that all major bull market runs--and especially those in commodity markets--experience significant, profit-taking price pullbacks in overall major price uptrends. In fact, serious downside price corrections in major bull market runs oftentimes lead traders to initially believe the market has topped out, only to see prices then make a strong recovery and push on to fresh highs. Big downside price corrections in overall bull markets can last a while, too. Veteran market watchers know this. While serious near-term technical damage has been inflicted in silver, the more important longer-term technical postures for both gold and silver remain fully bullish. Precious metals market bulls can still point to recent history being on their side, as dips in gold and silver have become bargain-hunting buying opportunities as prices have recovered and went on to set new highs.
Crude oil prices were solidly lower again Wednesday on more profit taking and follow-through selling from the losses on Tuesday. However, the crude bulls still have the overall near-term technical advantage as June futures prices on Monday hit a fresh two-plus year high. Metals traders should continue to keep a close eye on the crude oil market. More downside price pressure in crude oil futures would likely lead to more selling in precious metals, too. Crude oil is a leader in the raw commodity market sector.
The U.S. dollar index traded slightly lower Wednesday. Prices hit a fresh 2.5-year low Wednesday and then did see a tepid short-covering bounce from the low. The weak overall technical posture of the U.S. dollar index remains a bullish factor for the precious metals markets. The inverse trading relationship between the precious metals and the dollar index has become keener recently. Some market watchers wonder if the dollar index will put in a market low when the Federal Reserve quantitative easing program officially ends this summer. So far, however, that's wishful thinking on the part of the greenback bulls.
Traders are turning their attention to a European Central Bank meeting on Thursday and the U.S. jobs report on Friday. It's not expected that the ECB will raise interest rates Thursday, but the ECB chief Trichet's comments following the meeting will be closely scrutinized.
The London P.M. gold fixing $1,541.00 versus the previous P.M. fixing of $1,540.25.
Technically, June Comex gold futures closed nearer the session low Wednesday. No significant chart damage has occurred in gold. Gold bulls remain in overall near-term technical control. However, silver market action recently, with big daily downside moves and high volatility, is worrisome to the gold market bulls. Gold prices are still in a three-month-old uptrend on the daily bar chart and in a 10-year-old uptrend on the longer-term monthly chart. Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at Monday's record high of $1,577.40. Bears' next near-term downside price objective is closing prices below psychological support at $1,500.00. First resistance is seen at $1,520.00 and then at $1,530.00. First support is seen at Wednesday's low of $1,505.50 and then at $1,500.00. Wyckoff's Market Rating: 7.5.
July silver futures prices closed nearer the session low Wednesday and hit a fresh four-week low. Heavy long liquidation in silver has been seen recently, in part due to margin call selling following the CME raising Comex silver trading margins. Serious near-term chart damage has been inflicted recently. Bulls still have the slight overall near-term technical advantage, but have faded badly and need to show fresh power very soon. The next downside price breakout objective for the bears is closing prices below solid technical support at $37.50. Bulls' next upside price objective is producing a close above solid technical resistance at $45.00 an ounce. First resistance is seen at $40.00 and then at $40.50. Next support is seen at Wednesday's low of $38.94 and then at $38.50. Wyckoff's Market Rating: 5.5.
July N.Y. copper closed down 1,175 points at 413.55 cents Wednesday. Prices closed near the session low and closed at a fresh six-week low close. The big selling pressure in gold and silver, and in crude oil, pressured the copper market today. Copper bears now have the near-term technical advantage. Copper prices are in a three-week-old downtrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 435.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the March low of 409.50 cents. First resistance is seen at 415.00 cents and then at 419.20 cents. First support is seen at Wednesday's low of 412.85 cents and then at this week's low of 410.75 cents. Wyckoff's Market Rating: 4.5.
Hey! This evening I will likely tweet on after-hours price action in gold and silver. If you want daily, or nightly, up-to-the-second market analysis on gold and silver price action, follow me on Twitter. It's free, too. My account is @jimwyckoff .
 
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