P.M. Kitco Metals Roundup: Gold, Silver Post Dramatic Late-Day Price Rebounds To End Higher

(Kitco News) - Comex gold and silver futures prices suddenly surged higher near midday Monday, to reverse early, substantial losses and then ended the U.S. day session higher and near their daily highs. Heavy short covering and bargain hunting were featured during the precious metals’ turnarounds. The key “outside markets” were also in a bullish posture for gold and silver Monday, as the U.S. dollar index was lower and crude oil prices were higher. Gold on Monday ended a seven-session losing streak, while silver posted technical action that now hints it has put in a near-term market bottom. Comex June gold last traded up $18.70 at $1,383.00 an ounce. Spot gold was last quoted up $24.80 at $1,385.50.  July Comex silver last traded up $0.313 at $22.67 an ounce.
There was also a report released at midday Monday that could have sparked some safe-haven buying demand for gold and some short covering. Moody’s reportedly said if the U.S. fails to act on its budget problems in 2013, then the ratings agency might downgrade U.S. government debt. However, that news is not at all earth-shaking and it was likely just a coincidence that it was released about the same time gold and silver embarked upon their rallies.
Gold and silver futures got off to another rocky start to begin the trading week. Both markets were under strong pressure in overnight and in early morning U.S. action. One report overnight said investors worldwide have dumped around $22 billion worth of gold exchange traded funds (ETFs) over the last nearly five months. The big rally in the U.S. and Japanese stock markets, a stronger U.S. dollar, and low inflation expectations worldwide are major bearish weights on the metals and entire raw commodity sector at present.
The Japanese yen’s rebound against the U.S. dollar was featured Monday. Much of the rebound is likely short covering after the yen’s major descent the past several months. Japan’s economy minister said Monday the downside price action in the yen is about completed. There is a Bank of Japan monetary policy meeting Tuesday and Wednesday that will be closely watched by the market place. However, the BOJ is not expected to make any major policy changes.
Reports from China Monday said Chinese housing prices rose significantly in April, by up 3.7% and up 2.8% in two separate readings. This led to ideas Chinese monetary officials could tighten policy to stem inflationary price pressures. Such would be a bearish development for the raw commodity sector. There is more key Chinese economic data due out later this week.
Dallas Fed president Richard Fisher said on CNBC Monday morning that the Federal Reserve is presently debating on when to wind down the Fed’s quantitative easing program. Notions the Fed will “taper” its monthly bond-buying program (QE3) sooner rather than later is another bearish factor for the raw commodity markets, including the precious metals.
The London P.M. gold fixing is $1,354.75 versus the previous P.M. fixing of $1,368.75.
Technically, June gold futures closed prices closed nearer the session high Monday and hit a fresh four-week low early on. Prices scored a bullish “outside day” up on the daily bar chart Monday. The gold bears are still in near-term technical control. Prices are in a 7.5-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,400.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the April low of $1,321.50. First resistance is seen at Monday’s high of $1,397.90 and then at $1,400.00. First support is seen at $1,368.00 and then at $1,350.00. Wyckoff’s Market Rating: 2.5
July silver futures prices closed nearer the session high and scored a big “outside day” up on the daily bar chart Monday. Monday’s price action also produced a bullish selling “exhaustion tail” on the daily bar chart, whereby prices dropped to a 2.5-year low and then the sellers suddenly became exhausted at the lower price levels and then rallied to close nearer the daily high. Monday’s price action, including the bullish exhaustion tail, is a clue that the silver market has put in a near-term bottom. Silver bears still have the overall near-term technical advantage. Prices are still in a 7.5-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $23.84 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at Monday’s low of $20.25. First resistance is seen at $23.00 and then at Monday’s high of $23.24. Next support is seen at $22.50 and then at $22.00. Wyckoff's Market Rating: 2.5.
May N.Y. copper closed up 290 points at 335.00 cents Monday. Prices closed nearer the session high on more short covering. The key “outside markets” were also bullish for copper Monday as the U.S. dollar index was lower and crude oil prices were higher. Copper bulls and bears are now back on a level near-term technical playing field. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the May high of 339.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 320.00 cents. First resistance is seen at Monday’s high of 336.45 cents and then at 339.00 cents. First support is seen at 332.50 cents and then at 330.00 cents. Wyckoff's Market Rating: 5.0.
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By Jim Wyckoff