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A.M. Kitco Metals Roundup: Gold Sharply Higher On Bernanke Boost, Plummet In U.S. Dollar Index

Thursday July 11, 2013 8:37 AM

(Kitco News) - Gold prices are sharply higher Thursday and hit a fresh two-week high near $1,300.00 in overnight trading. The precious metals and the rest of the market place are reacting to Wednesday afternoon's dovish "Fed speak" that has also driven the U.S. dollar index sharply lower. As has been the case quite often on up days recently, short covering and perceived bargain-basement buying are featured in gold and silver. August gold was last up $36.30 at $1,283.00 an ounce. Spot gold was last quoted up $21.60 at $1,285.00. September Comex silver last traded up $0.735 at $19.90 an ounce.

Most U.S. markets had closed their day sessions Wednesday afternoon when Federal Reserve Chairman Ben Bernanke in a speech on Fed history said during a question-and-answer session that the U.S. central bank still needs to be very accommodative in its monetary policy for economic growth to continue, and that the Fed will not raise interest rates "for some time" to come. Bernanke's remarks, along with the FOMC minutes, released Wednesday afternoon, showing a deep split between members on when to start to wind down the Fed's monthly bond-buying program (quantitative easing) has at least temporarily changed the market place's notions of when QE will begin to be scaled back. It appears the market place now believes the Fed will start to "taper" its monthly bond buying program later rather than sooner.

The past few months have seen Bernanke's remarks and other Fed data roil the market place, and Wednesday's Fed events did not disappoint. The U.S. dollar index dropped sharply on the Fed news, while gold and U.S. Treasury bond and notes futures prices shot higher. Other commodity markets also saw buying support on the Fed news. The easy money policies of the Federal Reserve and other major central banks of the world the past few years have been a major bullish factor for the bond and raw commodity markets.

Asian and European stock markets rallied on the Fed news. U.S. stock index futures prices are also posting good gains in early pre-opening trading. China equities were also boosted on notions that China's central bank or the Chinese government could soon introduce measures to stimulate domestic growth.

In other overnight news, the central banks in Japan, Thailand, Malaysia and South Korea kept their monetary policies unchanged and said there are no inflationary pressures at their latest meetings. However, Indonesia's central bank raised its key interest rate by 0.5% due to inflationary worries.

Nymex crude oil prices are weaker Thursday on some mild profit taking, but did hit a 14-month high overnight. With Nymex crude trading above $105 a barrel, that is a bullish underlying factor for the raw commodity sector, including the precious metals.

U.S. economic data due for release Thursday includes the weekly jobless claims report, import and export prices, ISCS chain store sales trends, and the Treasury budget statement.

The London A.M. gold fix is $1,280.75 versus the previous London P.M. fixing of $1,256.00.

Technically, the gold market bears remain in overall near-term technical control. However, the bulls have gained some upside near-term technical momentum this week. A bullish weekly high close on Friday would begin to suggest that a market low is in place. The gold bulls' next upside near-term price objective is to produce a close above technical resistance at $1,300.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at this week's low of $1,214.40. First resistance is seen at the overnight high of $1,297.20 and then at $1,300.00. First support is seen at $1,277.50 and then at the overnight low of $1,262.10.

Silver bears have the overall near-term technical advantage. Prices hit a fresh three-week high overnight and the bulls have gained some upside momentum this week. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $21.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at this week's low of $19.67. First resistance is seen at the overnight high of $20.25 and then at $20.50. Next support is seen at $19.83 and then at the overnight low of $19.43.

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Read the latest news in gold and precious metals markets at Kitco News.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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