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P.M. Kitco Roundup: Gold Post Sharp Gains, Hits 6-Week High, as Bulls Gain Technical Momentum

Thursday January 23, 2014 2:15 PM

(Kitco News) - Gold prices ended the U.S. day session sharply higher and hit a six-week high Thursday. The rally was fueled by short covering and technical buying, including pre-placed buy stop orders being triggered. The U.S. dollar index traded solidly lower Thursday, and that was also a bullish daily "outside market" force working in the gold and silver bulls' favor.

There were also unconfirmed news reports India's government is considering lifting at least part of its gold import duties on its citizens. Indian citizens are major gold consumers, but they have been squelched on their gold buying the past year due to the higher duties imposed by the Indian government. February gold was last up $25.80 at $1,264.50 an ounce. Spot gold was last quoted up $28.10 at $1265.50. March Comex silver last traded up $0.246 at $20.085 an ounce.

It’s no coincidence that weakness in the world stock markets, led by solid losses in the U.S. stock indexes, helped to boost the gold market Thursday. Importantly, if more air starts to come out of the highly inflated stock market balloon, gold prices will continue to appreciate as investor money cycles out of paper assets and into hard assets.

Some weaker U.S. economic data Thursday also was friendly to the precious metals bulls, as it suggests the U.S. Federal Reserve may have to back off on its tapering of its monthly bond-buying program, also known as quantitative easing. The weaker U.S. data also helped to sink the U.S. dollar index.

In overnight news, China’s flash purchasing managers index (PMI) fell to 49.6 in January from 50.5 in December—the lowest reading in six months. A PMI reading below 50.0 suggests contraction in the manufacturing sector. This news pressured Asian stock markets and to a lesser degree European stocks. The weaker data is also a bearish underlying factor for the raw commodity sector, as China is the world’s largest consumer of metals and other raw commodities.

Meantime, the data firm Markit on Thursday reported the European Union’s preliminary PMI came in at 53.2 in January from 52.1 in December—the best reading in two and one-half years. This latest economic data from the EU corroborates other recent data that suggests the bloc has pulled out of economic recession. Thursday’s report also hints the European Central Bank will not have to implement additional monetary stimulus measures.

The London P.M. gold fix is $1,263.00 versus the P.M. fixing of $1,241.00.

Technically, February gold futures prices closed nearer the session high, hit a fresh six-week high and scored a big and bullish “outside day” up on the daily bar chart Thursday. The gold bulls gained fresh upside technical momentum Thursday, to begin to suggest that a market low is in place. A three-week-old uptrend on the daily bar chart was re-established Thursday. 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 today’s low of $1,230.80. First resistance is seen at the December high of $1,267.50 and then at $1,275.00. First support is seen at $1,255.30 and then at $1,250.00. Wyckoff’s Market Rating: 4.0

March silver futures prices closed near mid-range Thursday and were supported by the weaker U.S. dollar index. Short covering was featured. Silver bears still have the overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the January high of $20.67 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the January low of $19.31. First resistance is seen at Thursday’s high of $20.31 and then at this week’s high of $20.435. Next support is seen at Thursday’s low of $19.645 and then at $19.50. Wyckoff's Market Rating: 2.5.

March N.Y. copper closed down 490 points at 328.80 cents Thursday. Prices closed nearer the session low and hit a four-week low. Weak Chinese economic data helped to sink the copper market Thursday. Copper bears now have the slight overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at this week’s high of 335.80 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 325.00 cents. First resistance is seen at 330.00 cents and then at 332.50 cents. First support is seen at Thursday’s low of 327.65 cents and then at 326.00 cents. Wyckoff's Market Rating: 4.5.

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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