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FOCUS: Gold Futures Rise Monday On Summers News, Technical Chart Support

By Debbie Carlson of Kitco News
Monday September 16, 2013 11:15 AM

(Kitco News) - Gold futures are higher in Monday morning dealings, finding support from technical charts and after the surprising news that former Treasury Secretary Lawrence Summers withdrew his nomination for the chairmanship of the Federal Reserve.

At 10:55 a.m. EDT, December gold is up $11.90 an ounce to $1,320.50. CME Group Standard & Poor’s 500 December stock index futures are up 13.20 points at 1,695.20.

News broke Sunday the Summers withdrew his name from being nominated as Fed chairman. It came as a surprise since financial market participants saw Summers as the leading candidate to replace current Chairman Ben Bernanke when he steps down next year. Just Friday, a Japanese newspaper story said that President Obama was going to nominate Summers for the position, a report later denied by the White House.

Stocks and gold rallied during Asian trading hours when the news came out, while U.S. Treasury yields and the U.S. dollar slipped. Summers was seen by economists as being less likely to continue the quantitative easing program the Fed has had in place to help kick-start the economy.

Sterling Smith, futures specialist, commodity research, Citibank Institutional Client Group, said gold’s positive reaction to the news is understandable.

“This helps to narrow the process a bit. Gold is liking the idea that (the Fed chair) will not be Mr. Summers,” he said.

Also lifting gold are positive technical chart signals and that might have more to do with the yellow metal’s strength. December gold futures held support at of $1,304.60, encouraging some technical buying, Smith said.

Several analysts said the current leading candidate is Janet Yellen, the vice chairwoman of the Board of Governors of the Federal Reserve.

“The market is particularly bullish on Yellen as the next Fed chairperson because many investors believe that she is much more likely to continue the ultra-accommodative policies that were instituted by Bernanke,” said a precious metals trader. 

Smith said that viewpoint is why gold can rally at the same time as equities, the idea that an “easier money” policy will continue.

Yellen does not have a lock on the job, however, analysts said, as other candidates might be considered.

“We had noted that Summers was not in fact a shoe-in for the job weeks ago, but now caution that Yellen is similarly no certainty, for the same reason. There are enough other qualified economists with similar broad views -- Christina Romer, Alan Blinder, Stanley Fischer to name three -- to leave plenty of doubt,” said Avery Shenfeld, CIBC WM Economics.

The news about Summers may color some market participants view of this week’s Federal Open Market Committee meeting, which ends Wednesday. Market expectations are that the Fed will announce that it will start tapering its QE program. Gold prices were weaker recently on the idea of reigning in the ultra-loose monetary policy.

“The selection of Chairman Bernanke’s successor could also be pivotal for assessing the significance and credibility of any shifts in the FOMC’s forward guidance made at this week’s meeting,” said Nomura.

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By Debbie Carlson of Kitco News; dcarlson@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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