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Unrefined pieces of silver are stacked at the KGHM copper and precious metals smelter processing plant in Glogow. (PETER ANDREWS/Reuters)
Unrefined pieces of silver are stacked at the KGHM copper and precious metals smelter processing plant in Glogow. (PETER ANDREWS/Reuters)

Market turmoil

Gold, silver pounded - and further downside appears imminent Add to ...

Comex gold and silver futures prices ended the U.S. day session sharply lower after hitting 2.5-year lows and setting new daily lows in late trading.

Fresh, serious technical damage was inflicted in the gold and silver markets Thursday, to suggest they will see still more selling pressure in the coming weeks. Comex August gold last traded down $90, or nearly 7 per cent, at $1,284.00 an ounce. The August contract traded down to a low of $1,281.60 in late trading. Spot gold was last quoted down $65.50 at $1,286.25. July Comex silver last traded down $1.818 at $19.80 an ounce. July silver hit a low of $19.64 in overnight trading.

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Fed Chairman Ben Bernanke at his press conference Wednesday afternoon strongly hinted the Fed in the coming months will back off the accelerator on its monthly bond buying. After digesting the Fed news the market place reckons the Fed will 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 per cent due to recent Indian government taxing measures meant to reduce the country’s trade imbalance.

With gold and crude oil prices taking big hits Thursday, to suggest more downside price pressure in both markets, it will be hard for most other raw commodity futures markets to sustain a price uptrend. In fact, Thursday’s price action suggests the general bear market in the raw commodity sector is likely to continue for at least a few more months.

The U.S. dollar index was sharply higher Thursday and has made a big rebound from Wednesday morning’s four-month low. Wednesday’s Fed news is greenback bullish. Crude oil prices were pressured Thursday by the stronger dollar and on profit taking after prices hit a four-month high Wednesday. These two key “outside markets” were in a fully bearish posture for the raw commodity markets Thursday, including the precious metals.

The London P.M. gold fixing is $1,292.50 versus the previous P.M. fixing of $1,372.75.

Technically, the gold market took a 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 $1,300.00, at the April low of $1,323.00 and then at $1,338.00. First support is seen at Thursday’s low of $1,281.60 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.

July New York copper closed down 830 points at 305.80 cents Wednesday. Prices closed nearer the session low and hit a fresh contract low. The key “outside markets” were fully bearish for copper as the U.S. dollar index was solidly higher and crude oil prices were sharply lower. Copper bears have the solid near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 320.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 300.00 cents. First resistance is seen at 307.50 cents and then at 310.00 cents. First support is seen at Thursday’s contract low of 304.05 cents and then at 302.50 cents.

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