Gold, silver prices pull back as U.S. dollar, bond yields see strong rises

Gold and silver prices are lower in midday U.S. trading Wednesday, on routine downside price corrections following solid gains posted on Monday and Tuesday. A strong rebound in the U.S. dollar index today, along with a significant rise in U.S. Treasury yields, are also bearish outside market elements working against the gold and silver markets at mid-week. December gold was last down $11.60 at $1,718.90 and December silver was down $0.649 at $20.455.

Gold prices down-ticked following the early morning release of a slightly stronger-than-expected U.S. ADP jobs report showing a gain of 208,000 in September. That compares to expectations for a rise of 200,000. Arguably the most important U.S. data point of the week, if not the month, is Friday's employment situation report for September from the Labor Department. The key non-farm jobs number is expected to come in at up 275,000. The August report showed a non-farm jobs rise of 315,000.

Global stock markets were mixed overnight, with European shares mostly weaker and Asian shares mostly firmer. U.S. stock indexes are lower at midday, on routine corrective pullbacks after solid gains posted on Monday and Tuesday that were the largest two-day advance in over two years.

Said market analyst Craig Erlam of OANDA: "It's been a very impressive relief rally, albeit one aided by a rose-tinted interpretation of certain economic indicators and a terrible plunge in the weeks before. This isn't the time to get carried away but it is understandable that we're seeing some relief. It all hangs on whether the (recent economic) data is the start of a weakening trend or just a blip, as with the July inflation drop."

With so many gold and silver bears, it doesn't take much to trigger a short squeeze

In overnight news, New Zealand's central bank raised interest rates by 50 basis points, to 3.5%, and hinted of more to come, with policymakers even debating 75 basis points next time, as core inflation remains too high and labor resources are tight.

Today's OPEC+ meeting saw the cartel make a large crude oil output cut of 2 million barrels per day, in response to a weakening global economic outlook. The crude oil market saw no major reaction, as prices had been rallying in recent days on the expected OPEC cut.

The key outside markets today see the U.S. dollar index strongly higher. Nymex crude oil prices are higher and trading around $87.75 a barrel. Meantime, the yield on the 10-year U.S. Treasury note is presently fetching 3.78%.

Technically, December gold futures saw a routine corrective pullback. Prices hit a three-week high Tuesday. The gold futures bears still have the overall near-term technical advantage. However, it appears a near-term market bottom is in place. Bulls' next upside price objective is to produce a close above solid resistance at $1,778.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week's low of $1,666.50. First resistance is seen at this week's high of $1,738.70 and then at the September high of $1,746.40. First support is seen at today's low of $1,708.80 and then at $1,700.00. Wyckoff's Market Rating: 3.0

December silver futures also saw a routine corrective pullback after hitting a three-month high Tuesday. The silver bulls have the slight overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $22.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at $21.00 and then at this week's high of $21.31. Next support is seen at $20.00 and then at $19.60. Wyckoff's Market Rating: 5.5.

December N.Y. copper closed up 120 points at 350.20 cents today. Prices closed nearer the session high again today and hit a nearly three-week high. The copper bears have the overall near-term technical advantage. Prices are still in a five-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 369.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the July low of 315.55 cents. First resistance is seen at today's high of 354.50 cents and then at 360.00 cents. First support is seen at Tuesday's low of 340.20 cents and then at this week's low of 335.20 cents. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips