Gold rebounds, silver sharply down amid bearish chart pattern
Gold prices are slightly higher and well up from daily lows, while silver prices are sharply lower in midday U.S. trading Thursday. Silver is seeing profit taking and weak long liquidation from the shorter-term futures traders, as the metal has seen a bearish chart pattern form. Gold traders are still somewhat looking to the silver market for daily price direction, with silver’s big losses limiting buying interest in gold today. February gold was last up $10.30 at $4,473.10. March silver prices were down $1.598 at $76.01.
Gold and silver traders/investors are bracing for an annual rebalancing of commodity indexes that is taking place now and could see futures contracts worth billions of dollars sold in the next few days. Bloomberg reports Citigroup Inc. has estimated about $6.8 billion in silver futures could be sold to meet the rebalancing requirements, and outflows from gold futures will total roughly the same amount. The selling is needed because of the sharp rise in the weighting of precious metals in commodity benchmark indexes, said Bloomberg.
The key outside markets today see the U.S. dollar index firmer. Crude oil prices are higher and trading around $57.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.16%.
Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.
Technically, February gold futures bulls’ next upside price objective is to produce a close above solid resistance at the contract/record high of $4,584.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,284.30. First resistance is seen at the overnight high of $4,475.20 and then at $4,500.00. First support is seen at today’s low of $4,415.00 and then at $4,400.00. Wyckoff's Market Rating: 7.0.
March silver futures see this week’s price action raising the specter of a bearish double-top reversal pattern forming on the daily bar chart. The bulls’ next upside price objective is closing prices above solid technical resistance at the record high of $82.67. The next downside price objective for the bears is closing prices below solid support at last week’s low of $69.225. First resistance is seen at $77.00 and then at $77.50. Next support is seen at today’s low of $73.53 and then at $72.50. Wyckoff's Market Rating: 7.0.
