By Jim Wyckoff Of Kitco News Comex gold futures prices are modestly higher in early U.S. trading Friday, on short covering and some bargain hunting following Thursday’s sharp sell-off. The bulls are still shaken and need to step up and show fresh power soon to avoid serious near-term technical damage. August gold last traded up $3.60 at $1,569.10 an ounce. Spot gold was last quoted up $2.80 an ounce at $1,568.50. July Comex silver last traded down $0.054 at $26.785 an ounce. The market place has stabilized a bit Friday morning, following Thursday’s routs in many markets, including commodities and stock indexes. But it’s still a “risk-off� mentality that pervades the market place heading into the weekend. The market place has so far taken in stride news late Thursday that Moody’s downgraded the credit ratings of 15 major world banks. The news was not surprising to traders and investors. This week’s downbeat economic data from the world’s major economies, including Thursday’s weak U.S. and China manufacturing activity, have raised the specter of deflation worldwide. Deflation is the archenemy of most markets, and especially of the commodity markets. Remember, however, that markets are the most bearish at their very bottoms. It’s my bias that most commodity markets’ prices have already made by far most of their bear moves, and that they have made or are close to making major bottoms, including gold. But if my notion is incorrect, meaning commodity market prices still have much more room on the downside in the coming months, then the entire world is in for some real hurting. The U.S. dollar index is slightly higher Friday morning as the greenback bulls have regained upside near-term technical momentum after Thursday’s big gains. Meantime, Nymex crude oil futures prices are slightly higher on tepid short covering and did hit another fresh 8.5-month low of $77.56 a barrel overnight. Crude oil remains in a solid overall bearish fundamental and technical posture. The London A.M. gold fix is $1,571.50 versus the previous London P.M. fixing of $1,582.00. There is no major U.S. economic data due for release Friday. Technically, August gold futures prices closed near the session low and closed at a fresh three-week low close Thursday as the bulls faded badly. Gold market bears have regained the overall near-term technical advantage. The gold bulls’ next upside price breakout objective is to produce a close above solid technical resistance at the June high of $1,642.40. Bears’ next near-term downside price objective is closing prices below solid technical support at the May low of $1,529.30. First resistance is seen at $1,575.00 and then at $1,580.00. First support is seen at the overnight low of $1,560.20 and then at $1,556.40. July silver futures prices hit a fresh six-month low overnight and on Thursday closed at a fresh 1.5-year low close. Serious near-term technical damage was inflicted Thursday in silver. Bears have the solid overall near-term technical advantage and gained more power Thursday. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $29.095 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the September 2011 low of $26.20. First resistance is seen at $27.00 and then at $27.17. Next support is seen at the overnight low of $26.565 and then at $26.20. Follow me on Twitter to immediately get the very latest market developments. If you are not on board, then you are not getting key analysis and perspective as fast or as often as you could! Follow me on Twitter to get my very timely intra-day and after-hours briefs on precious metals price action. The precious markets will remain very active. If you want market analysis fast, and in after-hours trading, then follow my up-to-the-second precious metals market perspective on Twitter. It’s free, too. My account is @jimwyckoff. By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

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