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NEW YORK (Dow Jones)--The precious metals complex turned negative on
Wednesday on the Comex division of the New York Mercantile Exchange as gold
took a lashing due to further fund selling while the U.S. dollar made gains
against the euro.
The most-active April gold contract settled $6.20 lower at $542.70 an ounce.
During the session the contract dipped to a $539 low, just above Tuesday's
five-week low of $537.80 an ounce.
Andrew Chaveriat of BNP Paribas said the weekly momentum of the gold market
is on the verge of a bearish crossover off an overbought extreme.
"The picture is reminiscent of the December 2004 high, which was followed by
a lengthy pullback. This time around, bearish momentum could fuel a deep and
sharp drop in gold prices," Chaveriat said.
During Wednesday's session, traders and analysts said players were faced with
a difficult gold market
"From Asia, to Europe to New York, the precious metals had a very nervous
range-bound behavior before succumbing to sharp selling towards the end of the
day," an analyst said.
Traders said the focus in New York remained on Federal Reserve Chairman Ben
Bernanke's testimony to congress.
While some traders said Bernanke's speech had a "hawkish" tone, it was enough
for the dollar to rise and weigh on precious metals.
Chaveriat said this week's decline in April gold below $548.50 confirmed a
secondary top is in place at $572.30, the Feb. 10 high, joining the $579.50
peak from Feb. 2.
"Secondary tops often exhaust buying power leading to substantial medium-term
and potentially longer-term declines," Chaveriat said.
Additionally, Chaveriat said the formation of this secondary top has been
accompanied by a dramatic increase in short-term volatility.
"A sharp increase in volatility is often associated with a turning point,"
Chaveriat said.
Meanwhile, silver futures followed gold lower with the March contract
settling down at $9.215 an ounce, off 10 cents on the day.
John Kosar of Asbury Research said silver prices are likely to continue their
recent decline for at least the next several weeks.
Kosar said that according to the most recent Commitment of Traders report,
commercials or institutional investors and large speculators are at similar
opposite net position extremes now, suggesting that silver prices will continue
to move lower.
The platinumpuorgmetals sector appeared to test positive ground earlier in
the session but later succumbed to the downward pressure of the rest of the
complex.
April platinum settled $12.40 lower at $1,006.50 an ounce. It dipped to a low
of $1,001 an ounce during the day.
March palladium ended the session $3.90 lower at $277 an ounce.
Settlements (open-outcry trading only):
London PM Gold Fix: $540.50 Versus $539.70 Tuesday
U.S. spot gold at 2:50 p.m. ET: $539.95, down $4.90 from previous day; Range:
$535.70-$547.45
April gold (RGCJ06) $542.70, down $6.20; Range $539.00-$549.80
March silver (RSIH06) $9.215, down 10 cents; Range $9.070-$9.405
April platinum (RPLJ06) $1006.50, down $12.40; Range $1001-$1025.80
March palladium (RPAH06) $277, down $3.90; Range $275-$289.40
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