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P.M. Kitco Roundup: Gold Ends Down, at 3-Week Low, in Active Trading; Pressured by Stronger U.S. Dollar

Thursday November 07, 2013 2:41 PM

(Kitco News) - Gold prices ended a busy U.S. day session with moderate losses and hit a three-week low Thursday, weighed down by a higher U.S. dollar index and some upbeat U.S. economic data. December Comex gold was last down $12.00 at $1,305.80 an ounce. Spot gold was last quoted down $11.60 at $1306.50. December Comex silver last traded down $0.168 at $21.605 an ounce.

Gold prices saw a short-lived pop in the immediate aftermath of a somewhat surprising move by the European Central Bank to cut its key interest rate Thursday. However, gains in gold quickly faded and fresh selling pressure surfaced because the U.S. dollar index shot sharply higher on the ECB news, while the Euro currency slumped.

Then shortly after the ECB rate-cut news, U.S. gross domestic product data showed a much stronger-than-expected reading, at up 2.8% on an annual basis in the third quarter versus expectations of a 2% to 2.5% rise. That gave the greenback an added boost and put downside price pressure on gold and silver. The U.S. dollar index did back off its daily high by the close, which also allowed the gold market to move up from its daily lows.

The much-anticipated ECB monthly monetary policy meeting Thursday saw the central bank cut its key lending rate by 0.25%, to 0.25%. While there were growing beliefs the ECB would at some point cut its key interest rate and further ease its monetary policy, the majority of analysts and economists polled believed the ECB would not make any policy move on Thursday. There was a contingent of market watchers that believed the ECB would move to ease its monetary policy at its December meeting, when fresh economic statistics will also be released by the ECB.

Recent EU inflation numbers are a bit worrisome as they suggest deflationary conditions could be on the horizon for the bloc. The recent EU inflation data bolstered ideas the ECB would move sooner to ease its monetary policy in an effort to keep the tepid EU economic recovery moving forward.

Thursday’s ECB rate cut gives the U.S. Federal Reserve some more leeway in altering its own monetary policy. It appears the Fed now has some more time before it has to decide to implement the much-talked-about tapering of its monthly bond-buying program. Deflation is a very bad economic phenomenon, and it would not surprise me to see the Fed and the ECB start to address this matter in the near future. Such could suggest the Fed leaving its monetary policy unchanged for quite some time to come, or even easing monetary policy more.

Traders and investors are now looking ahead to Friday’s key U.S. employment report for October. The non-farm payrolls number of that report is expected to have grown by around 120,000. The jobs report will be a gauge in helping the market place figure out when or if the Federal Reserve will start to wind down its quantitative easing of monetary policy.

China’s Communist party meets this weekend, during which time major plans and economic reforms are unveiled by the leaders of the country. The world market place will be closely watching for any proclamations coming from that confab.

The London P.M. gold fix is $1,307.25 versus the previous P.M. fixing of $1,319.00.

Technically, December gold futures prices closed nearer the session low Thursday and hit a fresh three-week low. Prices also scored a bearish “outside day” down on the daily bar chart. The gold market bears today reclaimed the near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the October high of $1,361.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the October low of $1,251.00. First resistance is seen at Thursday’s high of $1,326.00 and then at $1,330.00. First support is seen at Thursday’s low of $1,296.00 and then at $1,291.50. Wyckoff’s Market Rating: 4.5

December silver futures prices closed near mid-range and hit a fresh three-week low Thursday. Silver bulls and bears are still on a level near-term technical playing field. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October 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 this week’s high of $22.075 and then at $22.25. Next support is seen at Thursday’s low of $21.375 and then at $21.00. Wyckoff's Market Rating: 5.0.

December N.Y. copper closed up 10 points at 323.80 cents Thursday. Prices closed near mid-range. The key “outside markets” were bearish for copper Thursday as the U.S. dollar index was higher and crude oil prices were lower. Bulls and bears are on a level near-term technical playing field amid choppy trading. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the October high of 335.50 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the October low of 321.50 cents. First resistance is seen at Thursday’s high of 325.75 cents and then at 327.80 cents. First support is seen at this week’s low of 322.20 cents and then at 321.50 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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