Gold Sees Tepid Short-Covering Bounce; Bears Still in Control
New York (Oct 1) Gold prices ended the U.S. day session modestly higher on short covering and an upside technical correction after hitting a nine-month low Wednesday. However, the strong U.S. dollar and the overall bearish raw commodity sector at present are still giving the precious metals bulls fits. December Comex gold was last up $3.00 at $1,214.70 an ounce. Spot gold was last quoted up $5.30 at $1,214.50. December Comex silver last traded up $0.173 at $17.23 an ounce.
The economic report pace picked up Wednesday and is highlighted by Friday’s U.S. employment report. The batch of U.S. date released Wednesday was mixed but mostly downbeat, which helped to pressure the stock market, which in turn helped give a lift to safe-haven gold.
In overnight news, a German government 10-year bond auction fetched a record low yield of 0.93% Wednesday, in another signal of low confidence in the recovery of the European Union’s economy and worries about deflationary price pressures in the EU. There was another downbeat economic report coming out of the EU Wednesday, as the September manufacturing PMI came in at 50.3 versus expectations for a reading of 50.5, and a figure of 50.7 in August. The European Central Bank meets for its monthly monetary policy meeting on Thursday, but no major policy moves are expected yet, after the ECB just recently moved to ease monetary policy.
The U.S. dollar hit a six-year high against the Japanese yen Wednesdasy and hit a 22-month high against the Euro on Tuesday. The appreciation of the greenback has been a major bearish factor for the raw commodity sector in recent weeks. Most major world commodities are priced in U.S. dollars. When the greenback rises it makes those commodities more expensive to purchase with other currencies.
The so far non-violent pro-democracy demonstrations occurring in Hong Kong have for now moved off the front burner of the market place. However, any escalation or violence in the Hong Kong protesting could quickly see keen risk aversion enter the market place. China is celebrating a week-long national holiday this week.
The London P.M. gold fix was $1,216.50 versus the previous London A.M. fixing of $1,208.50.
Technically, December gold futures prices closed nearer the session high Wednesday. Gold bears still have the solid overall near-term technical advantage. Prices are in an 11-week-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 this week’s high of $1,232.70. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,200.00. First resistance is seen at Wednesday’s high of $1,220.00 and then at $1,225.00. First support is seen at this week’s low of $1,204.30 and then at $1,200.00. Wyckoff’s Market Rating: 1.0
December silver futures prices closed near mid-range Wednesday and saw short covering in a bear market. Prices Tuesday hit a contract and four-year low. The silver bears still have the solid overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at Wednesday’s high of $17.44 and then at this week’s high of $17.635. Next support is seen at $17.00 and then at the contract low of $16.85. Wyckoff's Market Rating: 1.0.
December N.Y. copper closed up 245 points at 303.20 cents Wednesday. Prices closed nearer the session high and saw short covering after hitting a 14-week low early on. Copper bears still have the firm overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 310.00 cents.