Gold futures prices are lower and hit a fresh 8.5-month low in early U.S. trading Thursday. Follow-through technical selling pressure and more weak-long liquidation are featured. The stronger U.S. Dollar Index is also a major bearish factor for the precious metals markets.
Traders are still digesting the release Wednesday afternoon of the Federal Reserve's Open Market Committee minutes from early January. Those minutes said U.S. economic conditions are improving to the point that some FOMC members think its massive asset-purchasing program (quantitative easing) may have to be changed soon. The FOMC will further address the issue at its next meeting in March. It can be argued, and many market analysts are saying, that some markets overreacted to the FOMC minutes. First, there was not at all a consensus among the FOMC members on whether to end the asset purchase program sooner rather than later. And if the Fed does indeed target the unemployment rate for its monetary policy decisions, the easy money policy of the central bank likely won't end any time soon. Fed Chairman Bernanke also remains firmly in the dovish monetary policy camp, most agree.
Reports Thursday said physical demand for gold in India is increasing due to the recent sharp fall in prices prompting some bargain hunting from consumers.
The U.S. Dollar Index is solidly higher early Thursday and hit a fresh three-month high overnight. The U.S. dollar bulls have gained strong upside technical momentum recently, to suggest the dollar index has put in a market bottom and that prices can now trend sideways to higher in the near term.
Meantime, Nymex crude oil futures prices are solidly lower early Thursday and hit a fresh six-week low overnight. The crude oil bulls have faded badly this week. The selloff in crude oil this week is also bearish for the raw commodity sector, including the precious metals.
Technically, April gold futures prices hit a fresh 8.5-month low Thursday.
Serious near-term technical damage has been inflicted recently. Gold prices are in an accelerating four-week-old downtrend on the daily bar chart. However, the gold market is now very oversold, technically, on a short-term basis, and due for at least a corrective upside bounce very soon.
The gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at this week's high of $1,618.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the May 2012 low of $1,538.70. First resistance is seen at $1,580.00 and then at $1,590.00. First support is seen at the overnight low of $1,554.30 and then at $1,550.00.