Gold, Silver Prices Pressured As Crude Oil Market Melts Down

(Kitco News) - Gold andsilver prices aresolidly lower in early U.S. trading Friday. Bearish outside market forces areworking against the precious metals markets today, as the crude oil market iscareening lower and the U.S. dollar index is not far below last week’s 16-monthhigh. Gold prices hit a four-week low overnight, while silver dropped to asix-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.

TheU.S. economic highlight of the day Friday is the just-released producer priceindex report for October, which came in at 0.6%. That’s a big miss from theconsensus forecast of up 0.3% from September. Gold and silver prices slightlyextended overnight losses and touched their session lows after the release ofthe data, which falls into the camp of the U.S. monetary policy hawks. Worldwideinflation has generally been creeping higher in recent months, although not yetdeemed problematic. However, this is a very hot PPI number that is likely toget the attention of U.S. Federal Reserve officials.

Globalstock markets were mostly down overnight. U.S. stock indexes are pointed towardlower openings when the New York day session begins, on another correctivepullback from Wednesday’s solid gains.

Globalinvestors 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 dropped20% from their peak. Nymex crude oil prices are lower again today, hit aseven-month low and are now trading below $60.00 a barrel. The severelydown-trending crude oil market is also a bearish element for most of the rawcommodity sector.

Partof the weakness in oil prices late this week could be coming from reports SaudiArabia is studying the feasibility of dissolving the OPEC oil cartel. Reportsthis week said the U.S. is now pumping around 11.5 million barrels of oil aday. Indeed, OPEC is nowhere near the world power player in the oil market thatit was even 10 years ago.

Despitesome upbeat economic data from China on Thursday, Asian markets are stillworried about the overall health of the world’s second-largest economy. Reportstoday said Chinese auto sales fell 12% in October, from a year ago.

Theother 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 thegreenback bulls still have the solid overall near-term technical advantage.

OtherU.S. economic data due for release Friday includes the University of Michiganconsumer sentiment survey and monthly wholesale trade.

Technically,gold bears have regained the overall near-term technical advantage. Bulls’ nextupside price objective is to produce a close in December futures above solidresistance at the October high of $1,246.00. Bears' next near-term downsideprice 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 seenat last week’s low of $1,213.40 and then at $1,200.00. Wyckoff's Market Rating:4.0

Decembersilver futures bears have the solid overall near-term technical advantage.Silver bulls' next upside price breakout objective is closing prices abovesolid technical resistance at $15.00 an ounce. The next downside price breakoutobjective for the bears is closing prices below solid support at the Septemberlow of $13.965. First resistance is seen at the overnight high of $14.425 andthen at this week’s high of $14.775. Next support is seen at $14.00 and then atthe September low of $13.965. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff

For Kitco News

Follow @jimwyckoffjwyckoff@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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