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P.M. Kitco Roundup: Gold Higher in "Sell the Rumor, Buy the Fact" Move after U.S. Budget/Debt Agreement

Wednesday October 16, 2013 2:22 PM

(Kitco News) - Comex gold prices ended the U.S. day session moderately higher Wednesday, on a surprise rally in the face of an agreement among U.S. lawmakers on a budget/debt ceiling deal that will reopen the government. Short covering was featured in both gold and silver markets. December Comex gold was last up $7.90 at $1,281.00 an ounce. Spot gold was last quoted up $0.90 at $1282.50. December Comex silver last traded up $0.159 at $21.35 an ounce.

The rally in gold after the budget/debt deal became apparent is a classic “sell the rumor, buy the fact” scenario that many times plays out in markets. Markets many times factor into their prices expected fundamental news events well before they ever occur. Then markets can see corrective price reversals when the event actually does occur. It’s another example of how markets can and do frustrate large numbers of traders. Indeed, many traders had become too confident that gold would experience a significant sell off if U.S. lawmakers passed budget/debt legislation before Thursday’s deadline. At the least Wednesday’s modest rally in gold prices gave the bulls a psychological boost, even if Wednesday’s price action was technically insignificant.

U.S. economic data released Wednesday had little impact on markets as focus was on the U.S. budget and debt ceiling talks. The Federal Reserve’s beige book, out in the afternoon, contained no significant news that traders did not already know and markets did not react.

Focus of the market place now turns to when will the next batch of U.S. economic data be released now that the government is set to reopen. The key October employment report, among many other economic reports, were postponed the past 16 days due to the U.S. government shutdown.

The London P.M. gold fix is $1,273.50 versus the previous P.M. fixing of $1,270.50.

Technically, December gold futures prices closed nearer the session high and saw short covering and bargain hunting. The gold market bears still have the overall near-term technical advantage. A seven-week-old downtrend is in place on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid 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 $1,251.00. First resistance is seen at this week’s high of $1,291.60 and then at $1,300.00. First support is seen at Wednesday’s low of $1,268.60 and then at last week’s low of $1,259.60. Wyckoff’s Market Rating: 3.5

December silver futures prices closed nearer the session high and saw short covering. Silver bears still have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $22.525 an ounce. The next downside price breakout objective for the bears is closing prices below major technical support at $20.00. First resistance is seen at Wednesday’s high of $21.445 and then at this week’s high of $21.68. Next support is seen at $21.00 and then at $20.65. Wyckoff's Market Rating: 3.0.

December N.Y. copper closed up 40 points at 331.15 cents Wednesday. Prices closed nearer the session high and hit a two-week high on short covering. Copper bulls and bears are on a level near-term technical playing field. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the October high of 333.75 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the September low of 319.05 cents. First resistance is seen at Wednesday’s high of 332.90 cents and then at 333.75 cents. First support is seen at 328.10 cents and then at Wednesday’s low of 326.35 cents. Wyckoff's Market Rating: 5.0.

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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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