P.M. Kitco Metals Roundup: Gold Hits 5-Month High on More Safe-Haven Buying as EU Debt Worries Mount

By Jim Wyckoff
28 April 2010, 2:02 p.m.

Gold was sought out by safer-haven investors worldwide Wednesday as more dour news surfaced regarding the European Union's smaller countries' efforts to deal with sovereign debt. June Comex gold futures hit a fresh nearly five-month high and closed near the session high Wednesday, up $9.60 an ounce at $1,171.80.

Reports hit the news wires Wednesday that Standard & Poors downgraded Spain's sovereign credit rating. Gold almost immediately pushed to a nearly fresh five-month high. The Spain comes on top of credit agency downgrades of the debt of Greece and Portugal on Tuesday.
 
Gold market bulls especially savored Wednesday's price action, as the precious yellow metal rallied in the face of a stronger U.S. dollar index that notched a fresh 12-month high. Recent weeks had seen gold categorized as a higher-risk commodity investment that tended to decline in price when the European Union's debt woes were reported and investor risk appetite shrunk. However, as the EU situation appears to be worsening, gold is now being snapped up by speculators and bargain-hunters this week.

The debt contagion fears have also produced buying of gold as traders move to hedge further downside European currency risk by buying the precious yellow metal with those currencies. Gold hit a new all-time high in Euro currency terms on Wednesday.

The London P.M. gold fixing was $1,161.00, compared to the previous P.M. fixing of $1,149.50.

The two-day meeting of the U.S. Federal Open Market Committee meeting that began Tuesday morning ends Wednesday afternoon. The meeting is garnering less attention due to the EU debt downgrades. It is widely expected the Fed will not raise interest rates at this meeting. However, the wording of the Fed statement following the meeting could hold clues to the Fed's actions in the coming weeks or few months.

From a technical perspective, June gold futures bulls have the solid near-term technical advantage and have gained more upside momentum this week. Prices are in an 11-week-old uptrend on the daily bar chart. Bulls' next upside technical objective is to produce a close above psychological resistance at $1,200.00. Bears' next downside price objective is closing prices below solid technical support at this week's low of $1,146.60. First resistance is seen at Wednesday's high of $1,175.30 and then at $1,180.70. Support is seen at Wednesday's low of $1,161.00 and then at $1,150.00. Wyckoff's Market Rating: 7.5.

May silver futures closed down 2.4 cents at $18.095 an ounce Wednesday. Prices closed nearer the session high and saw more profit-taking pressure. The U.S. dollar index was higher Wednesday, which did limit buying interest in silver. Silver bulls still have the overall near-term technical advantage. Prices are still in an 11-week-old uptrend on the daily bar chart. The next downside price objective for the bears is closing prices below solid technical support at last week's low of $17.49. Bulls' next upside price objective is closing prices above solid technical resistance at the April high of $18.605 an ounce. First resistance is seen at Wednesday's high of $18.25 and then at this week's high of $18.42. Next support is seen at $18.00 and then at Wednesday's low of $17.82. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed up 50 points at 336.85 cents Wednesday. Prices closed near mid-range and did hit another fresh five-week low early on. The U.S. dollar index was higher Wednesday, which did limit buying interest in copper. The bears this week have gained some fresh downside technical momentum. Prices are now in a three-week-old downtrend on the daily bar chart. The next downside price objective for the bears is closing prices below solid technical support at the March low of 329.00 cents. Bulls' next upside objective is pushing and closing prices above solid technical resistance at this week's high of 356.20 cents. First resistance is seen at Wednesday's high of 338.75 cents and then at 340.00 cents. First support is seen at Wednesday's low of 332.40 cents and then at 330.00 cents. Wyckoff's Market Rating: 5.0.

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