By Jim Wyckoff of Kitco News www.kitco.com
August Comex gold futures closed lower and nearer the session low Monday, hitting a fresh two-month low as prices also fell below what was strong technical support at the early-July low of $1,185.00 an ounce. August Comex gold closed down $7.00 an ounce at $1,181.20. Spot gold was last quoted down $11.80 at $1,181.50.
The U.S. dollar index firmed up slightly as the trading session progressed, while the Euro currency traded near steady levels. The Euro saw limited selling pressure despite a downgrade of Ireland's credit rating Monday, and the breakdown in financing discussions between Hungary and the International Monetary Fund during the weekend. A weak U.S. housing market index report Monday limited the upside in the U.S. dollar index.
Traders are awaiting the stress test results for European Union financial institutions, due out Friday. Some fears about Euro-zone banks and the EU countries' sovereign debt have been allayed recently, ahead of the stress test results. The Committee of European Banking Supervisors is testing 91 banks to see whether the banks can withstand a 3% decline in EU economic growth. The committee will also test for sovereign risk at a level beyond the market conditions experienced during May.
Traders are also awaiting Federal Reserve Chairman Ben Bernanke's testimony on monetary policy in front of Congress Wednesday and Thursday.
In overnight news, Barlcays Capital said it sees investment demand for gold remaining strong as it believes investors will look to hold hard assets during the continued financial market uncertainty. Barclays said if world interest rates start to rise again, investor demand for gold could begin to ease.
The London P.M. fixing was $1,181.00 compared to the previous P.M. fixing of $1,189.25.
From a technical perspective, August Comex gold futures closed nearer the session low again Monday after producing a technically bearish weekly low close last Friday. Price action Monday also saw a close below what was solid technical support at the July low of $1,185.00, which is another near-term bearish technical clue. The gold market bulls still have the slight overall near-term technical advantage, as prices just last month scored a new all-time high and a significant downside price correction is not unexpected.
Bulls' next near-term upside technical objective is to produce a close above solid chart resistance at last week's high of $1,218.80. Bears' next near-term downside price objective is closing prices below solid technical support at $1,168.00. First resistance is seen at $1,185.00 and then at Monday's high of $1,194.70. Support is seen at Monday's low of $1,176.90 and then at $1,170.00. Wyckoff's Market Rating: 5.5.
December silver futures closed down 22.2 cents at $17.625 an ounce Monday. Prices closed nearer the session low and hit a fresh six-week low. Some fresh near-term chart damage was inflicted in silver Monday as prices dropped below what was strong near-term technical support at the early-July low of $17.64. Prices are also in a four-week-old downtrend on the daily bar chart.
The silver bulls still have the slight overall near-term technical advantage, but are fading. The next downside price objective for the bears is closing prices below solid technical support at the May low of $17.17. Bulls' next upside price objective is closing prices above solid technical resistance at last week's high of $18.59 an ounce. First resistance is seen at $17.80 and then at $18.00. Next support is seen at Monday's low of $17.50 and then at the June low of $17.335. Wyckoff's Market Rating: 5.5.
December N.Y. copper closed up 110 points at 296.25 cents Monday. Prices closed near mid-range in quieter trading. Copper bears still have the overall near-term technical advantage. A bearish symmetrical triangle pattern has formed on the daily bar chart. The next downside price objective for the bears is closing prices below solid technical support at the July low of 288.00 cents. Bulls' next upside objective is pushing and closing prices above solid technical resistance at 314.00 cents. First resistance is seen at Monday's high of 298.30 cents and then at 300.00 cents. First support is seen at Monday's low of 295.00 cents and then at 292.50 cents. Wyckoff's Market Rating: 3.0.
