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04/15/2013

Gold, Silver Slammed to 2-Year Lows on Panic Selling
Monday April 15, 2013 2:10 PM
(Kitco News) - Gold and silver prices careened lower on massive panic selling pressure Monday that drove both market to more-than-two-year lows. Fear is pervasive in the raw commodity sector early this week as the two-session, $175-plus drop in gold prices also sent crude oil prices sharply lower and has spooked the entire market place. Silver has shed more than $4.00 an ounce since last Thursday’s closing levels in New York. June Comex gold last traded down $133.70 at $1,368.00 an ounce. Spot gold was last quoted down $109.20 at $1,368.25.  May Comex silver last traded down $2.811 at $23.525 an ounce.
Veteran traders and market watchers know that when panic sets in and markets start moving rapidly, trading and investing becomes a “money game.” Any other logic goes out the window because money in a trader’s trading account, or lack thereof, is paramount. A money game in markets occurs when there are huge money flows in one direction—in this case out of long gold and silver positions— and that begets even more selling as the pain of being so far “under water” becomes too great and traders have to liquidate their positions. Margin calls occur in the futures markets and traders are forced to abandon their already weak long positions. And then there is blood in the street, such as is the case now. The light at the end of the tunnel for gold and silver market bulls, as far away as it may now seem, is that “blood in the street” is usually a value-buying opportunity that occurs only a few times in a decade, if that much.
Those analysts proclaiming that there has been a radical shift in investor sentiment for gold are correct only on a short-term basis. Certainly, the near-term investor sentiment has turned bearish for gold. But all market prices go up and then go down—sometimes in volatile fashion like gold and silver the past two days. Importantly, investor sentiment is ever-changing and at some point down the road gold will be back in vogue as an investment asset—especially a safe-haven asset. History proves this to be true.
There has been no single fundamental catalyst for the panic selling in the gold and silver markets the past two trading sessions. Worries about demand for physical gold from China and India are getting some of the blame for the mass exodus of longs out of the gold and silver markets. Overnight, China reported its economy grew slower than expected during the first quarter, at 7.7% versus the expected rate of 8% annual growth. There are also worries about troubled European Union countries selling their gold reserves to help finance their financial bailouts from the European Central Bank and the International Monetary Fund. Cyprus government officials last week said selling part of that financially imperiled country’s gold reserves was on the table. Last week’s Federal Reserve FOMC meeting that signaled Fed members are divided on when to end the Fed’s quantitative easing of monetary policy also spooked the raw commodity market bulls.
Exchange traded funds (ETFs) for gold are also reportedly seeing very heavy outflows as investors cash out losing positions and are seeking other investment assets.
The U.S. dollar index traded near steady Monday. The greenback bulls have faded a bit recently but still have the overall technical advantage. Meantime, Nymex crude oil futures prices were sharply lower Monday and hit a four-month low.
The London P.M. gold fix is $1,395.00 versus the previous P.M. fixing of $1,535.50.
Technically, June gold futures closed nearer the session low Monday and careened to a fresh two-plus year low. Major near-term and longer-term chart damage has been inflicted the past two trading sessions. The only thing the bulls have going for them, technically, at present, is that the market is way oversold on a short-term technical basis. Gold prices are in a six-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,500.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at $1,400.00 and then at $1,425.00. First support is seen at Monday’s low of $1,355.30 and then at $1,530.00. Wyckoff’s Market Rating: 1.0
May silver futures prices closed nearer the session low and careened to a fresh 2.5-year low Monday. Major near-term and longer-term technical damage has been inflicted in silver and the bears are in full command, overall. However, the market is short-term oversold, technically. Prices are in a six-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $25.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $22.50. First resistance is seen at $24.00 and then at $24.50. Next support is seen at Monday’s low of $22.92 and then at $22.50. Wyckoff's Market Rating: 1.0.
May N.Y. copper closed down 610 points at 328.90 cents Monday. Prices closed near mid-range and dropped to an 18-month low early on Monday. More serious chart damage occurred Monday. Copper bears have the solid overall near-term technical advantage and gained more power Monday. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 340.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at Monday’s low of 319.35 cents. First resistance is seen at 330.00 cents and then at 332.50 cents. First support is seen at 325.00 cents and then at today’s low of 319.35 cents. Wyckoff's Market Rating: 1.0.