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A.M. Kitco Metals Roundup: Gold Near Steady as Bulls Gain More Confidence

Thursday March 21, 2013 8:07 AM

(Kitco News) - Gold prices are not straying too far from unchanged in early U.S. trading Thursday. The precious yellow metal bulls are having a good week as prices hover not far below Tuesday’s three-week high. Both the technical and fundamental postures of the gold market have improved a bit recently. April Comex gold last traded down $0.20 at $1,607.30 an ounce. Spot gold was last quoted up $1.40 at $1,608.50.  May Comex silver last traded up $0.033 at $28.85 an ounce.

The Cyprus financial crisis has still not been resolved and banks there are closed until next week. This is a messy situation, as Russia has its hands in the pie and the European Union and International Monetary Fund don’t like it. Mega-rich Russians have a large amount of their money parked in Cyprus banks. Russia has indicated it could bail out Cyprus, but details remain sketchy. The European Central Bank says it has funds ready for a Cyprus bailout, but insists there needs to be an EU-backed financial plan in place by Monday. This situation is bullish for the safe-haven gold market.

Meantime, there was more downbeat economic data coming out of the European Union Thursday. The Markit data company reported its composite purchasing managers’ index for the Euro zone fell to 46.5 in March from 47.9 in February. Any reading below 50.00 suggests contraction. Combined with recent EU economic data, Thursday’s fresh numbers further point to the Euro zone being in economic recession for yet another quarter in the first quarter of 2013. The Cyprus situation and the weak EU economic data combined to pressure European stock markets and the Euro currency, and it’s also an underlying positive for the gold market.

Asian stocks were mixed overnight as the Japanese stock market rallied as the yen continued to deflate. Chinese manufacturing data for March showed a preliminary PMI reading of 51.7 versus the final reading of 50.4 in February. The slightly better PMI reading for March did slightly lift the Shanghai stock market.

The market place is keeping an eye on developments coming out of North Korea. That nation issued fresh threats of a possible nuclear strike against U.S. bases in Japan. Any escalation in tensions between the U.S. and North Korea could send investors into safe-haven assets like gold.

Traders and investors have quickly digested the latest U.S. Federal Open Market Committee statement issued Wednesday afternoon. The FOMC left its monetary policy unchanged, which was not unexpected. However, what was just a bit bearish for the gold market and other raw commodity markets is that the Fed said it is aware of the costs of a very easy U.S. money policy and that it will be keeping a very close eye on U.S. economic growth progress. It appears the Fed, while keeping its monetary policy very accommodative at present, is beginning to slowly lay the ground work to wind down its easy money policies down the road--especially as the U.S. economy is picking up a slight head of steam. Fed Chairman Ben Bernanke held a press conference following the meeting’s conclusion Wednesday afternoon and said nothing market-sensitive.

The U.S. dollar index is trading near steady Thursday. Prices Tuesday hit a fresh 7.5-month high. The U.S. dollar bulls continue to hold the firm overall technical advantage. Meantime, Nymex crude oil futures prices are slightly lower early Thursday. The crude oil bulls have the slight near-term technical advantage at present. These two key “outside markets” will continue to have a significant daily influence on gold and silver prices.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the U.S. flash manufacturing PMI, the monthly house price index, existing home sales, leading economic indicators, and the Philadelphia Fed business survey.

The London A.M. gold fixing is $1,608.75 versus the previous London P.M. fixing of $1,607.50.

Technically, gold futures bulls have gained some fresh upside near-term technical momentum recently to begin to suggest a near-term market bottom is in place. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,619.70. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,575.00. First resistance is seen at this week’s high of $1,615.00 and then at $1,619.70. First support is seen at $1,600.00 and then at this week’s low of $1,589.60.

May silver futures bears have the overall near-term technical advantage, but prices have also been trading sideways and choppy for four weeks as the bulls have stabilized the market. This price action could be “basing” at lower price levels that can put in market bottoms and eventually kicks off price uptrends. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $29.495 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $27.925. First resistance is seen at this week’s high of $29.11 and then at last week’s high of $29.35. Next support is seen at the overnight low of $28.705 and then at Wednesday’s low of $28.40.

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

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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