Some technical chart analysts said in the short-term damage has been done to gold prices and further weakness is expected. Those who see lower prices are also skeptical that global leaders will take much action beyond pronouncement to stabilize frail outlooks. The global rout of all markets caught precious metals markets in the whirlpool of sinking prices.
The sell off this week was ignited when the Federal Reserve sought to flatten the yield curve by selling short-term debt and buying long-term securities. Although that move was expected, the Fed’s statement of “significant risks” to the U.S. economy shook investor confidence. Combined with a negative manufacturing reading out of China and persistent problems in Europe regarding a possible Greek default, investors started selling without discrimination. Only U.S. Treasurys and the dollar rose.
Gold fell in this break as investors sought to sell winning positions to their raise cash or meet margin calls in other markets. Any nervous buyers who had profits sought to pocket those as prices were caught in the downdraft. Of all the precious metals, silver saw the greatest losses.
The most-active December gold contract on the Comex division of the New York Mercantile Exchange settled at $1,639.80 an ounce, down 9.6% on the week. December silver settled at $30.101an ounce, down 26% on the week. In the Kitco News Gold Survey, out of 34 participants, 23 responded this week. Of those 23 participants, 12 see prices up, while 10 see prices down, and one sees prices sideways or unchanged.
Over the next few weeks, however, we think that prices will continue to fall and eventually test the $1,580-$1,650 range,” he said, adding those levels come from the 62% retracement of the July-August uptrend and from the May 2nd high.
Jim Wyckoff, technical analyst at Kitco News, said short-term technical charts have turned bearish, although long term charts are still bullish. He said the break through $1,705.40 was significant. Support for gold is seen at $1,600. For silver, Olympus Futures’ Nedoss said that market “has thrown in the towel,” especially after falling through the 200-day moving average around $36.07. Silver saw the worst performance of any precious metal as the industrial side and investor nervousness drags it down. Wyckoff said “very serious” near-term technical damage was done to silver futures. Resistance for December silver is at $33 and support at $30. (source www.forbes.com )
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