(Kitco News) - Gold and silver futures prices are sharply lower and have careened to better-than-2.5-year lows in early U.S. trading Thursday. The market place sees traders and investors in a keen “risk-off” mentality following Wednesday’s U.S. Federal Reserve events. Fresh, serious technical damage has been inflicted in the gold and silver markets to suggest they will see still more downside price pressure to come. Comex August gold last traded down $70.10 at $1,303.90 an ounce. The August contract traded down to a low of $1,285.00 in overnight trading. Spot gold was last quoted down $46.40 at $1,305.25. July Comex silver last traded down $1.458 at $20.165 an ounce. July silver hit a low of $19.64 in overnight trading.
Asian and European stock markets slumped overnight. U.S. stock indexes are also solidly lower Thursday morning. Most raw commodity markets are getting hit hard Thursday.
Importantly, world bond markets are also seeing serious selling pressure Thursday. The U.S. dollar index has rallied sharply after early Wednesday hitting a four-month low.
While the FOMC statement released Wednesday afternoon said U.S. monetary policy will not see an imminent change and there was no mention about tapering of the Fed’s monthly bond-buying program, Fed Chairman Ben Bernanke at his press conference after the statement was released hinted the Fed in the coming months will back off the accelerator on its monthly bond buying. After further digesting the Fed news the market place now reckons the Fed will indeed start scaling back its monthly bond purchases (tapering) by the end of this year. Some Fed watchers are now saying that by this time next year the Fed’s monthly bond buying could be completely gone. For the past few years the commodity markets have been supported by the devaluation of the U.S. dollar. Now that the Fed appears ready to “take the punch bowl away from the party,” many markets are spooked.
More raw commodity-market-bearish news came from China Thursday, as the HSBC flash PMI dropped to 48.3 in June from 49.2 in May. Any reading below 50.0 suggests contraction. Reports said the China manufacturing data Thursday was the weakest in months.
Other bad news for gold came from overnight reports that said Indian imports of gold will decline by 30% due to recent Indian government taxing measures meant to reduce the country’s trade imbalance.
There is civil unrest in Turkey and Brazil this week that traders and investors are still monitoring. If the situations there see an escalation and violence in the streets, the gold market could still see some safe-haven demand surface. But on this day the gold market has decided to act like its other commodity counterparts, which are risk assets.
The U.S. dollar index is sharply higher Thursday morning and has made a big rebound from Wednesday morning’s four-month low. Wednesday’s Fed news is greenback bullish. Crude oil prices are solidly lower Thursday, pressured by the stronger dollar and on profit taking after prices hit a four-month high Wednesday. These two key “outside markets” are in a bearish posture for the raw commodity markets Thursday, including the precious metals.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the U.S. flash manufacturing PMI, existing home sales, leading economic indicators and the Philadelphia Fed business outlook survey.
The London A.M. gold fixing is $1,303.25 versus the previous P.M. fixing of $1,372.75.
Technically, the gold market took another major bearish hit Thursday by dropping to a 2.5-year low, and importantly dropping below what was a very important chart support level at the April low of $1,323.00. Now, the door has been opened wide for more technical selling pressure in gold in the near term. The next major, longer-term downside price targets are $1,227, and then at $1,100 and then at $1,027 for nearby Comex futures.
August gold futures prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price objective is to produce a close above solid technical resistance at the May low of $1,338.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,250.00. First resistance is seen at the April low of $1,323.00 and then at $1,338.00. First support is seen at Thursday’s low of $1,285.00 and then at $1,275.00.
Silver bears have the strong overall near-term technical advantage and gained more power Thursday as prices dropped to a 2.5-year low and fell below what was major psychological support at $20.00. Like gold, fresh major chart damage has been inflicted Thursday to suggest still more strong downside price pressure in the near term. Prices are in an overall eight-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $21.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $19.00. First resistance is seen at the April low of $20.25 and then at $21.00. Next support is seen at the overnight low of $19.64 and then at $19.50.