By Jim Wyckoff
Comex gold futures closed modestly higher Tuesday. The market was supported on safe-haven buying amid keen investor uncertainty presently gripping most markets. However, the sell off in commodity sector Tuesday did limit price gains in gold. June gold closed up $4.00 an ounce at $1,198.00.

The European Union's debt crisis appeared to be ratcheted up a notch Tuesday, following the weekend seizure of a Spanish bank by Spain's bank regulators. Credit spreads in European Union nations are again widening and the Euro currency was under strong selling pressure again Tuesday. There are increasing concerns the EU's debt crisis will spread from Greece to Portugal and Spain, and possibly turn into a worldwide contagion that could sink the world's major economies. Traders have been buying gold with European currencies as a hedge against further weakness of the European currencies. Such will likely continue to be the case as long as the U.S. dollar remains robust against its European counterparts.

Rising tensions between North Korea and South Korea added to the high anxiety among traders and investors Tuesday. South Korea is taking diplomatic and economic action against North Korea following strong evidence that North Korea did torpedo a South Korean navy vessel earlier this year.

The upside advance was limited in gold Tuesday by sharply lower crude oil prices, which also put downside pressure on most other commodity markets. Nymex crude hit a fresh 10-month low Tuesday and dropped below $68.00 a barrel. A potentially bearish market factor for gold is the specter of commodity price deflation. With crude oil prices declining over $20.00 a barrel in a short time, and with copper and lumber futures prices in steep downtrends, combined with world stock markets that are tumbling, a double-dip world economic recession cannot be ruled out, which could in turn cause commodity price deflation.

The London P.M. gold fixing was $1,198.25 versus the previous P.M. fixing of $1,187.00.

From a technical perspective, June Comex gold futures closed nearer the session high Tuesday. The gold bulls have the overall near-term technical advantage and are recovering from last week's strong downside selling pressure. There are no early technical clues to suggest a market top is close at hand. Prices are in a 14-week-old uptrend on the daily bar chart. Bulls' next upside technical objective is to produce a close above solid technical resistance at the record high of $1,249.70. Bears' next downside price objective is closing prices below technical support at the May "reaction low" of $1,156.20. First resistance is seen at $1,200.00 and then at $1,215.00. Support is seen at Tuesday's low of 1,185.20, at $1,180.00 and then at this week's low of $1,176.80. Wyckoff's Market Rating: 7.0.

July silver futures closed down 21.9 cents at $17.781 an ounce Tuesday. Prices closed near mid-range. The key "outside markets were in a fully bearish posture for silver Tuesday, as the U.S. dollar index was sharply higher, while crude oil and the U.S. stock indexes were sharply lower. The silver bulls still have the overall near-term technical advantage, but have faded and need to show more power soon. A bearish pennant pattern may be forming on the daily bar chart. The next downside price objective for the bears is closing prices below solid technical support at the May "reaction low" of $17.08. Bulls' next upside price objective is closing prices above solid technical resistance at $19.00 an ounce. First resistance is seen at $18.00 and then at $18.33. Next support is seen at Tuesday's low of $17.53 and then at last week's low of $17.41. Wyckoff's Market Rating: 6.0.

July N.Y. copper closed down 1,055 points at 304.20 cents Tuesday. Prices closed nearer the session low. The key "outside markets were in a fully bearish posture for copper Tuesday, as the U.S. dollar index was sharply higher, while crude oil and the U.S. stock indexes were sharply lower. Prices are in a seven-week-old downtrend on the daily bar chart and the bears have the overall near-term technical advantage. The next downside price objective for the bears is closing prices below solid technical support at last week's low of 290.05 cents. Bulls' next upside objective is pushing and closing prices above solid technical resistance at 326.75 cents. First resistance is seen at 310.00 cents and then at Tuesday's high of 311.95 cents. First support is seen at 300.00 cents and then at 295.00 cents. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff, contributing to Kitco News; jim@jimwyckoff.com

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