Gold Sees Surprising Sell Off; Profit Taking, Sell Stops, Asian Demand Worries Blamed

Kitco News: Gold prices finished the U.S. day session with sharp losses Tuesday, but did close up from their daily lows. The market was pressured by profit taking from the shorter-term traders and by sell stop orders being triggered in the futures market to accelerate the price downdraft. June gold was last down $24.50 at $1,303.10 an ounce. Spot gold was last quoted down $23.80 at $1,303.25. May Comex silver last traded down $0.46 at $19.55 an ounce.

Tuesday’s heavy selling pressure in gold surprised many market watchers. Rising tensions in Ukraine should have supported gold prices on a safe-haven basis, many reckoned. Gold prices did move up from their daily lows on news reports of gunfire in Ukrainian cities being occupied by pro-Russian forces. The Ukrainian president on Tuesday said he ordered his own troops to confront the protesters in eastern Ukraine cities.

Some attributed part of gold’s sharp losses Tuesday to concerns that physical demand from Asia, and especially China, will not be robust in the coming months. The firmer U.S. dollar index this week has been somewhat bearish for gold. However, the dollar index is still in a very weak overall technical posture.

Gold’s price action Tuesday is a reminder of the age-old saying: “Markets can and will do anything and everything to frustrate the largest number of traders.” Still, it’s my bias that gold price action will get upside support if the Russia-Ukraine crisis further escalates. During the European Union sovereign debt crisis that helped to drive gold to its all-time high a few years ago there were days when gold prices were sharply lower even though the EU debt crisis had new and seemingly gold-bullish developments.

Ironically, Tuesday marked the one-year anniversary of gold’s biggest one-day percentage drop in 30 years. Last year the gold market plummeted on fears the U.S. Federal Reserve would begin winding down its quantitative easing of monetary policy.

Traders and investors are awaiting key economic data from China on Wednesday, including its gross domestic product reading. China is the world’s largest consumer of raw commodities.

U.S. economic data released Tuesday was mostly a non-event and included the weekly Johnson Redbook and Goldman Sachs retail sales reports, the consumer price index, the Empire State manufacturing survey, Treasury international capital data, and the NAHB housing market index.

Technically, June gold futures prices closed near mid-range after being much lower in earlier trading. Still, near-term chart damage was inflicted Tuesday to give the bears fresh downside near-term technical momentum. Bears have regained the near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,331.40. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the March low of $1,277.40. First resistance is seen at $1,310.00 and then at $1,320.00. First support is seen at $1,290.00 and then at Tuesday’s low of $1,284.40. Wyckoff’s Market Rating: 4.0

May silver futures prices closed near mid-range and hit a 2.5-month low Tuesday. The bears have the solid overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $20.40 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 $19.75 and then at $20.00. Next support is seen at Tuesday’s low of $19.22 and then at $19.00. Wyckoff's Market Rating: 2.0.

May N.Y. copper closed down 545 points at 299.30 cents Tuesday. Prices closed nearer the session low and hit a fresh three-week low. Bears have the overall near-term technical advantage and gained fresh downside momentum Tuesday. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at last week’s high of 308.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the March low of 287.70 cents. First resistance is seen at 300.00 cents and then at 302.50 cents. First support is seen at Tuesday’s low of 296.55 cents and then at 295.00 cents. Wyckoff's Market Rating: 3.0.

Courtesy: Kitco News