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A.M. Kitco Metals Roundup: Gold Sees Selling Pressure Following Hawkish FOMC Statement

Thursday October 31, 2013 8:29 AM

(Kitco News) - Gold prices are solidly lower in early U.S. trading Thursday, in the aftermath of a somewhat surprising FOMC statement that the market place deemed a bit hawkish. The U.S. dollar index is posting good gains Thursday morning, and that’s also a bearish daily weight on the precious metals markets. December Comex gold was last down $21.10 at $1,328.10 an ounce. Spot gold was last quoted up $9.10 at $1354.00. December Comex silver last traded down $0.818 at $22.15 an ounce.

After digesting Wednesday’s statement from the U.S. Federal Reserve’s Open Market Committee, many traders and investors have now become more uncertain regarding the timing of the Fed starting to wind down its massive quantitative easing program that has been in place for several years. The FOMC statement on Wednesday said the U.S. economy has made improvements in recent months. This somewhat more “hawkish” tone of the Fed has led to fresh speculation in the market place that the “tapering” of the Fed’s monthly bond-buying program could some sooner—possibly as soon as the December FOMC meeting. However, this view is certainly not pervasive in the market place.

The latest FOMC statement that did throw a bit more uncertainty in the market place now makes upcoming U.S. economic data even more critical, as the Fed and markets try to get a better reading on the U.S. economy’s present trajectory.

In the European Union overnight, it was reported that the inflation rate for the bloc came in at a four-year low in October, at an annual rate of 0.7%. That rate is well below the European Central Bank’s target rate of just under 2%. The low inflationary pressures also give the ECB room to continue its very easy money policies, if EU economic growth continues to languish.

Thursday is an extra important trading day, from a technical perspective. It’s the last trading day of the month. It’s technically significant when, on the last trading day of the month, a market closes at or very near its monthly high or low for that month.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the ISM Chicago business survey and the weekly DOE energy stocks report.

Overnight reports said demand for physical gold in India is slack, despite the festival season approaching. The Diwali festival of lights is on Sunday. The reports said demand for gold in India this year will be down 10% to 15% from last year, due to higher tax rates on gold imports, and the weakness of the Indian currency.

The London A.M. gold fix is $1,333.75 versus the previous P.M. fixing of $1,354.75.

Technically, December gold futures bulls and bears are still on an overall level near-term technical playing field at present. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,361.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at the overnight high of $1,343.00 and then at $1,350.00. First support is seen at $1,325.00 and then at $1,309.50.  

December silver futures are seeing heavy profit-taking pressure Thursday after prices hit a six-week high Wednesday. Bulls have quickly lost their slight near-term technical advantage and are now back on a level near-term technical playing field with the bears. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at this week’s high of $23.095 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $21.00. First resistance is seen at $22.25 and then at $22.50. Next support is seen at $21.50 and then at $21.25.

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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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