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P.M. Kitco Roundup: Gold Ends Higher on Safe-Haven Demand; FOMC a Non-Event

Wednesday January 29, 2014 2:40 PM

(Kitco News) - Comex gold futures ended the U.S. day session with moderate gains Wednesday on short covering and bargain hunting following selling pressure on Monday and Tuesday. Importantly, there was also some safe-haven buying interest in gold as the market place remains concerned about the strains on some emerging market currencies. April gold was last up $11.50 at $1,261.80 an ounce. Spot gold was last quoted up $5.50 at $1261.75. March Comex silver last traded up $0.112 at $19.615 an ounce.

Wednesday afternoon’s U.S. Federal Reserve’s Open Market Committee (FOMC) statement on its monetary policy showed the Fed did another $10 billion per month tapering of its quantitative easing, now at $65 billion in month in bond-buying.
That was the general belief in the market place, albeit not a clear consensus.  The FOMC statement also reiterated that U.S. interest rates will remain extremely low. A CNBC survey of 45 economists released Tuesday saw the vast majority expecting the Fed to continue to taper its monetary policy. At this week’s FOMC meeting Fed Chairman Ben Bernanke also handed over to Janet Yellen the reins of the U.S. central bank.

The major news of the day came from Turkey, as its central bank raised its key lending rate sharply, up to 12%, to try to stave off the deflating Turkish lira. The move by Turkey’s central bank acted to calm the market place for just a few hours, as the U.S. stock market fell under pressure by mid-morning U.S. trading. India’s central bank also raised its interest rates this earlier week. The South African central bank raised its interest rates on Wednesday, following Turkey’s move.

World stock and financial markets are jittery amid worries about some non-major world currencies being stressed. Recent weaker Chinese economic data and concern about the U.S. Federal Reserve reeling in its very easy monetary policy are credited with pressuring several secondary world currencies in recent trading sessions. The main fear is the potential for a lack of financial market liquidity in the emerging nations, if the world’s major central banks start to turn off their easy-money spigots that have allowed the world markets to be awash in cash the past five years.  History shows that problems with smaller currency markets can spread to the majors and create a worldwide contagion. This is what has the gold market supported by safe-haven demand.

For the raw commodity market bulls, including the precious metals bulls, their fate still lies with the health of the U.S. and world stock markets. If the heretofore high-flying world stock indexes continue to show weakness, as has been the case just recently, then money flows will move from equities to the “hard assets” that include raw commodities.

The Chinese Lunar New Year holiday is approaching later this week, whereby the world’s largest nation and second-largest economy mostly shuts down for several days. Most Asian markets could see subdued trading action during the Chinese holiday.

The London P.M. gold fix is $1,264.00 versus the P.M. fixing of $1,251.25.

Technically, April gold futures prices closed nearer the session high Wednesday. The gold bulls have some upside technical momentum to suggest that a market low is in place. However, they need to show more power soon to keep their momentum. A four-week-old uptrend 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 last week’s low of $1,230.80. First resistance is seen at Wednesday’s high of $1,269.30 and then at this week’s high of $1,279.80. First support is seen at $1,250.00 and then at this week’s low of $1,248.20. Wyckoff’s Market Rating: 3.5

March silver futures closed up $0.142 an ounce at $19.65 Wednesday. Prices closed near mid-range on short covering and bargain hunting. Silver bears still have the overall near-term technical advantage. However, trading has been choppy and sideways for the past four weeks, to suggest some “basing” action that does put in market bottoms. 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 today’s high of $19.965 and then at this week’s high of $20.09. Next support is seen at Wednesday’s low of $19.45 and then at the January low of $19.31. Wyckoff's Market Rating: 2.5.

March N.Y. copper closed down 140 points at 324.00 cents Wednesday. Prices closed near the session low and hit another six-week low. Copper bears have the overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 330.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 320.00 cents. First resistance is 325.00 cents and then at Wednesday’ high of 326.90 cents. First support is seen at Wednesday’s low of 323.70 cents and then at 320.00 cents. Wyckoff's Market Rating: 4.0.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter at @jimwyckoff



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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