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Gold Drops Below $1,200, Hits 9-Mo. Low, Amid Upbeat U.S. Data, Strong Dollar

Wednesday November 23, 2016 14:52
(Kitco News) - Gold prices ended the U.S. day session solidly lower, hit a nine-month low and fell below key chart support at $1,200.00 Wednesday. A higher U.S. dollar index today was a major bearish outside market force working against the precious metals market bulls. The dollar index surged to a 13-year high today. The bearish near-term technical postures for gold and silver markets also invited more chart-based selling. Sell stop orders were triggered in the Comex gold futures market when prices breached the key $1,200.00 level. December Comex gold was last down $23.50 an ounce at $1,187.70. December Comex silver was last down $0.262 at $16.37 an ounce.

As the U.S. markets opened for business Wednesday morning, many traders and market watchers were sipping their coffee and taking it easy, reckoning another historically quiet Wednesday trading session leading up to Thursday's U.S. Thanksgiving holiday. However, the release of a much-stronger-than-expected U.S. durable goods orders report rattled many markets, including gold, currencies, and bond markets.

U.S. durable goods orders in October rose by 4.8%, compared to expectations of a rise of 2.7%. The September reading was also revised up to 4.0%. Today's durables news is one more very solid clue the Federal Reserve will indeed raise interest rates at its December FOMC meeting.

The Federal Reserve’s FOMC minutes were released Thursday afternoon. The minutes contained an upbeat assessment of the U.S. economy, but the marketplace saw that as nothing new. Most market watchers were already expecting the Fed to raise U.S. interest rates in December.

U.S. stock indexes paid little attention to the U.S. economic data released Wednesday and are trading weaker on some modest profit taking from recent gains that saw major U.S. indexes hit record highs Tuesday. U.S. equities have benefited the past two weeks on what is being called the "Trump effect."

There were also reports out Wednesday that the Indian government is exploring a ban on gold imports to help the government combat illegal, black market money activities in India. These reports may have added some downside pressure on the gold market today. India is one of the world’s top-two gold importers, along with China.

The other key outside market on Wednesday saw Nymex crude oil futures prices just slightly weaker. Nymex prices were closing in on $50.00 a barrel on Tuesday and hit a three-week high, before a corrective pullback occurred. Energy market watchers are awaiting the Nov. 30 OPEC oil cartel meeting. Many reckon OPEC may be able to come to a final agreement to cut production, although the outcome of the meeting still remains much in question.

While trading activity in many markets was active Wednesday morning, following the batch of U.S. economic data released, activity waned ahead of the U.S. Thanksgiving holiday on Thursday, when U.S. markets are closed.

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

Technically, December gold futures prices closed nearer the session low. The gold bears have the solid overall near-term technical advantage and gained more power today. Prices are in a 4.5-month-old downtrend on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,220.90. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,150.00. First resistance is seen at $1,200.00 and then at $1,210.00. First support is seen at today’s low of $1,181.20 and then at $1,175.00. Wyckoff's Market Rating: 2.5

December silver futures prices closed near mid-range today and hit a six-month low. The silver market bears have the firm overall near-term technical advantage. Prices are in a 4.5-month-old downtrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.25 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at today’s high of $16.725 and then at this week’s high of $16.885. Next support is seen at today’s low of $16.155 and then at $16.00. Wyckoff's Market Rating: 3.0.

December N.Y. copper closed up 735 points at 261.80 cents today. Prices closed near the session high and closed at a 17-month high close today. The copper bulls have the solid overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the November high of 273.45 cents. The next downside price objective for the bears is closing prices below solid technical support at 242.60 cents. First resistance is seen at today’s high of 262.50 cents and then at 265.00 cents. First support is seen at 260.00 cents and then at 255.00 cents. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

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