(Kitco News) – Gold and silver prices are solidly lower in early U.S. trading Friday. Bearish outside market forces are working against the precious metals markets today, as the crude oil market is careening lower and the U.S. dollar index is not far below last week’s 16-month high. Gold prices hit a four-week low overnight, while silver dropped to a six-week low. December gold futures were last down $11.70 an ounce at $1,213.20. December Comex silver was last down $0.193 at $14.235 an ounce.
The U.S. economic highlight of the day Friday is the just-released producer price index report for October, which came in at 0.6%. That’s a big miss from the consensus forecast of up 0.3% from September. Gold and silver prices slightly extended overnight losses and touched their session lows after the release of the data, which falls into the camp of the U.S. monetary policy hawks. Worldwide inflation has generally been creeping higher in recent months, although not yet deemed problematic. However, this is a very hot PPI number that is likely to get the attention of U.S. Federal Reserve officials.
Global stock markets were mostly down overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins, on another corrective pullback from Wednesday’s solid gains.
Global investors are spooked by the big drop in crude oil prices the past few weeks. Some are saying the oil market is now in a bear market as prices have dropped 20% from their peak. Nymex crude oil prices are lower again today, hit a seven-month low and are now trading below $60.00 a barrel. The severely down-trending crude oil market is also a bearish element for most of the raw commodity sector.
Part of the weakness in oil prices late this week could be coming from reports Saudi Arabia is studying the feasibility of dissolving the OPEC oil cartel. Reports this week said the U.S. is now pumping around 11.5 million barrels of oil a day. Indeed, OPEC is nowhere near the world power player in the oil market that it was even 10 years ago.
Despite some upbeat economic data from China on Thursday, Asian markets are still worried about the overall health of the world’s second-largest economy. Reports today said Chinese auto sales fell 12% in October, from a year ago.
The other key “outside market” today finds the U.S. dollar index modestly higher. The USDX has backed down from its 16-month high scored last week, but the greenback bulls still have the solid overall near-term technical advantage.
Other U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey and monthly wholesale trade.
Technically, gold bears have regained the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at the October high of $1,246.00. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at $1,200.00. First resistance is seen at $1,225.00 and then at $1,230.00. First support is seen at last week’s low of $1,213.40 and then at $1,200.00. Wyckoff’s Market Rating: 4.0
December silver futures bears have the solid overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $15.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the September low of $13.965. First resistance is seen at the overnight high of $14.425 and then at this week’s high of $14.775. Next support is seen at $14.00 and then at the September low of $13.965. Wyckoff’s Market Rating: 2.0.
By Jim Wyckoff
For Kitco News