Gold Seeker Closing Report: Gold and Silver Fall Over 2% and 5%

The Metals:

Gold fell to $1581.38 by about 5:30AM EST before it rebounded to $1592.77 at about 9AM EST, but it then fell throughout most of trade in New York and ended near its late session low of $1549.40 with a loss of 2.44%.Silver bumped back up to $28.79 in London before it also fell back off in New York and ended near its late session low of $26.849 with a loss of 5.72%.

Euro gold fell to about €1201, platinum lost $50.50 to $1376.50, and copper dropped another 4 cents to about $3.36.

Gold and silver equities fell over 3% by late morning and remained near that level for the rest of the day.

The Economy:

U.S. Retail Sales Rose 4.5% Before Christmas Bloomberg

Bernanke Openness Drive May Add Briefings Bloomberg

Tomorrow at 8:30AM EST brings Initial Jobless Claims for 12/24 expected at 368,000 and at 10AM is the Pending Home Sales report for November expected at 0.6%.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil fell as the U.S. dollar index and treasuries rose on renewed worries about Europe that sent the Dow, Nasdaq, and S&P over 1% lower.

“The European Central Bank said the continent's banks parked a record $590.72 billion with it overnight. That means those banks are less willing to take the risk of making short-term loans to each other, opting instead to earn low interest rates from the ECB.”

Euro Seen Having Another Bumpy Ride in 2012 Yahoo

U.S. to Press for Yuan Gains While Declining to Name China a Manipulator Bloomberg

Among the big names making news in the market today were NY Times, Morgan Stanley, Netflix, Gap, and Wendy’s.

The Commentary:

“Unless we get some sort of unexpected fundamental news such as an eruption of tensions in the Straits of Hormuz or some sort of economic news pertaining to sovereign debt-related downgrades, etc., gold looks to go out rather quietly for the year. Trading conditions are EXTREMELY THIN and volume is practically non-existent signifying the lack of interest on the part of the speculative community to take on any positions of size before the year's end in gold, or for that matter, much of anything at this point.

Traders seem mostly content to ride what they have into the New Year and reassess things when the full contingent of traders will be back at the start of the New Year. This trader is doing the exact same thing. Quite frankly, these last few months have been so extremely volatile that any sort of break from the incessant up and down, up and down, up and down, is most welcome. Why bother subjecting oneself to any more of the madness than is absolutely necessary. After all, the markets are not going anywhere and will be sitting there waiting for us all next year.

That being said, let's take a quick summary of where things stand for the yellow metal as we draw near to the end of this year.

The long term monthly chart shows gold in a very strong uptrend, with price still contained within the upchannel drawn off the low made back in late 2008, just as the Fed undertook its QE1 program and began providing liquidity to the markets.

Note I have shown two different sets of Fibonacci retracement levels to provide some perspective. The first set shown in RED, details the entire move going back nearly a decade. You can see that the retracement back lower in price, has not even reached the minimum 23.6% retracement level shown in red ($1480 - $1475). In other words, the price dip after reaching $1900 has been rather negligible on the long term chart.

Even if we start with the low made in 2008, the market has just breached that minimum 23.6% retracement level but remains well above the next level of 38.2%. Theoretically, gold could correct as far down as $1450 and still remain in a strong uptrend.

That being said, there are some warning signs on this same chart that should not be overlooked. Taking a close up of the same chart but narrowing in on the more recent months, one can clearly see the DOUBLE TOP formation near the $1900 which was confirmed by the BEARISH OUTSIDE REVERSAL MONTH pattern.

That signal occurs when a market goes on to make yet a new high but then fails to extend its gains and begins selling off. The sell off takes the market BELOW the low from the previous bar or candle thus forming a bar that has a HIGHER HIGH and a LOWER LOW. This is a very negative pattern that will dominate the chart UNLESS OR UNTIL the HIGH OF THAT BAR is taken out decisively. This is currently what we have going on in gold.

What bulls need to be concerned about would be a DOWNSIDE PUSH BELOW the horizontal RED support line labeled, "critical support". Were that to occur, price would then be on target to drop back down towards the former support levels noted on the first chart shown above. That comes in below $1500 beginning near $1480 and extending lower towards $1450. Failure there would see gold possibly drop as low as $1300 before gaining any traction.

If you note the second chart below, the one detailing the entire move from $250 to $1900+, you can see that its 38.2% retracement level (SHOWN IN RED) comes in at $1290. Meanwhile the upper chart shows a 50% retracement level coming in near $1310. Between the two of these points, we could expect chart support to emerge, should prices indeed drop this low.

So much for the bearish scenario. In order to get something going to the upside, bulls need to target and then take out the failed attempt to extend back towards $1900 which occurred last month (November) when gold could not push past $1800 after a strong rally off of the $1550 level took place. That failure was the signal for market bears to become more aggressive and those longs with profits wishing to book them to do so before they vanished. The combined selling has led to a fairly substantial sell off as we moved through the month of December and head for year's end. If, and that is a big "IF", bulls can take out $1800, there is little in the way of chart resistance showing up until we get back to the recent all-time highs near $1900. If the market can take out this level, and I expect a FEROCIOUS fight from the bullion banks to prevent this as they full well know the implications of a breach of a former all time high, then gold will see a handle of "2" in front of it very, very quickly, before the month of January 2012 is out with solid potential to reach $2100 sometime in February.

As always with markets, only time will tell. Everything else is mere speculation.” - Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

GATA Posts:

Gold left some investors in the dust

Gerald P. O'Driscoll Jr: The Fed's covert bailout of Europe

Got Gold Report: Trader positions in silver most bullish in 10 years

The Statistics:

Activity from: 12/27/2011

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: No change in Total Tonnes from yesterday’s data.

COMEX Gold Trust (IAU) Total Tonnes in Trust: 172.52: No change from yesterday’s data.

Silver Trust (SLV) Total Tonnes in Trust: 9,605.79: No change from yesterday’s data.

The Miners:

Freeport’s (FCX) dividend, Golden Star’s (GSS) optioned property, Gold Resource’s (GORO) dividend, and Paramount’s (PZG) new resource estimates were among big stories in the gold and silver mining industry making headlines today.

WINNERS

LOSERS

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

Please see Yahoo’s Mining/Metals News Wire for all of today’s mining news.

- Chris Mullen, Gold Seeker Report

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Additional Resources for today’s Gold Seeker Report can be found:

• http://www.capitalupdates.com
• http://www.goldseek.com
• http://www.silverseek.com
• http://www.goldreview.com

©Gold Seeker 2011

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