Gold Lower on Corrective Pullback from Friday’s Gains
Posted by Adam King on November 26, 2012
Gold prices moved slightly lower in early trading on Monday during a mild downside correction from the strong gains during Friday trading. U.S. gold futures for February delivery traded down $1.00 to $1,752.80 per troy ounce as the spot price of gold moved up $3.80 to $1,734.00. U.S. silver futures for March delivery gained $0.029 to $34.235 per troy ounce.
Technical buying was the source of the surge in gold and silver prices on Friday and an analysis with Forbes views the Monday pullback as lending new upside technical momentum to gold bulls.
Overnight trading focused on the results of a meeting between Eurozone members in Brussels on Monday which will decide when and how to disburse a bailout tranche to the debt-beleaguered Greece. Expectations are that monies will be released to Greece soon, though possibly not on Monday. A drop in consumer confidence in Germany ahead of the Christmas season suggests European investors are still very cautious regarding the European Union sovereign debt crisis, which will continue to be watched very closely by American investors.
U.S. traders and investors are returning from the Thanksgiving holiday to the negotiations between U.S. lawmakers and President Obama on the fiscal cliff tax increases and spending cuts set to take effect in January of 2013. Congress also returns from its Thanksgiving break this week, which will most likely bring developments in the fiscal cliff negotiations that will sway markets sensitive to the news.
Following a strong selling pressure on Friday, the U.S. dollar index is slightly higher on Monday morning. U.S. dollar bulls have been suffering in recent sessions, though the move has been good for precious metals. A strong dollar makes purchases of precious metals priced in dollars more expensive for holders of other currencies. The recent sell-off in the dollar did bring in overseas demand from markets that have been waiting to buy on the dips.
Sales of American gold coins and silver coins at the U.S. Mint signal a lot of buying on perceived dips, as well as other investor demand. The Mint sold 67,000 ounces of gold coins for the month of November up to the 22nd, far above the 59,000 ounces sold in all of October.
For bulls, the price breakout objective is a close in February futures above the chart resistance at the October high of $1,800.00 per troy ounce. Bears are experiencing solid support at the $1,700.00 per troy ounce level. Resistance on the upside begins at Friday’s high of $1,757.10 and then at $1,765.00.
Silver prices hit another six-week high overnight following Friday’s bullish weekly high close. A breakout price point is a close above the technical resistance at the October high of $35.51 per troy ounce.