Gold Bullion (GOLD)

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P.M. Kitco Metals Roundup: Comex Gold Ends at Bullish Weekly High Close Friday, to Begin to Suggest Market Bottom in Place

Friday May 18, 2012 2:33 AM

Comex gold futures prices surged late this week on short covering and bargain hunting, but more importantly on fresh safe-haven investment demand, following recent selling pressure that drove gold prices to a 10-month low of $1,526.70 on Wednesday. Gold produced a bullish weekly high close on Friday, which is an early technical clue that a near-term market bottom is in place for the yellow metal. June gold last traded up $14.90 at $1,589.80 an ounce. Spot gold was last quoted up $15.70 an ounce at $1,590.50. July Comex silver last traded up $0.61 at $28.63 an ounce.

The world market place was impacted late in the week by a weaker-than-expected U.S. business activity report from the Philadelphia Federal Reserve on Thursday morning. That economic data came on the heels of Wednesday’s FOMC minutes that hinted further quantitative easing of U.S. monetary policy is possible if the economy were to continue its lethargic ways. The U.S. and Asian stock markets sputtered in the wake of the Philly Fed report, while European stock markets tried to stabilize following recent selling pressure related to the EU debt crisis in their own back yard.

There is now fresh talk of further quantitative easing of U.S. monetary policy (QE3). Such would arguably be commodity-market bullish and possibly stock market bullish, despite the specter of reduced demand prospects due to the sluggish economy.

There is still high anxiety in the market place, as the EU debt crisis saga rolls on. On Friday, 16 Spanish banks credit ratings were downgraded by Moody’s. There was also talk in the market place that U.S. banking heavyweight JP Morgan may have $100 billion in risky bonds in its risk-management portfolio. Remember what happened to MF Global and its risky bets on European debt.

Importantly, the fact gold started to rally strongly from its recent selling pressure suggests the rally is more than just short covering. Gold saw decent safe-haven investment demand late in the week, heading into a weekend of trader/investor jitters. The fact that gold rallied strongly late this week also hints the market place is feeling even higher anxiety. It could be a very active trading day on Monday. Gold bulls are presently feeling much better than they have the past couple weeks.

The European Union debt and financial crisis is still on the front burner of the market place. After the early-week failed efforts by Greek politicians to form a coalition government, fresh Greek elections are now scheduled for mid-June. Concerns regarding Greece leaving the Euro zone are high, as the Greeks’ commitment to financial austerity is highly questionable. There were reports Friday that EU officials are preparing a plan in case they are forced to kick Greece out of the EU. Spanish and Italian bond yields were above 6% most of the week, which is also stressing the EU financial system.

The U.S. dollar index is traded near steady Friday and hit another fresh four-month high. The greenback has benefited recently on fresh safe-haven demand mainly due to the EU situation. During times of keen investor uncertainty, history has shown that gold and the U.S. dollar can both appreciate at the same time. The dollar index bulls still have good upside near-term technical momentum. Meantime, crude oil futures prices were lower Friday and hit a fresh 6.5-month low of $91.40 a barrel. Crude oil remains in a bearish fundamental and technical posture.

The London P.M. gold fixing was $1,589.50 versus the previous London P.M. fixing of $1,554.00.

Technically, June gold futures prices closed at a bullish weekly high close on Friday and that begins to suggest a near-term market bottom is in place. However, gold bears still have the overall near-term technical advantage at present. A 2.5-month-old downtrend is still in place on the daily bar chart. The gold bulls’ next upside price breakout objective is to produce a close above psychological resistance at $1,600.00. Bears' next near-term downside price objective is closing prices below solid technical support at this week’s low of $1,526.70. First resistance is seen at Friday’s high of $1,597.50 and then at $1,600.00. First support is seen at $1,580.00 and then at Friday’s low of $1,567.80. Wyckoff’s Market Rating: 3.5.

(Note: For a complete explanation of my exclusive “Wyckoff’s Market Rating,” just send me an email at [e-mail] and I’ll email it back to you.—Jim)

July silver futures prices also saw a bullish weekly high close on Friday, but bulls have more work to do to begin to suggest a market low is in place. The market saw short covering and bargain hunting after prices Wednesday hit a 4.5-month low. Silver prices are still in a 2.5-month-old downtrend on the daily bar chart. The silver bears still have the overall near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $29.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the December low of $26.50. First resistance is seen at Friday’s high of $28.895 and then at $29.00. Next support is seen $28.00 and then at Friday’s low of $27.78. Wyckoff’s Market Rating: 3.0.

http://www.kitco.com/reports/KitcoNews20120518JW_pm.html