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Gold Rallies to 3.5-Month High on Weak U.S. Data, Bullish Charts, Slumping U.S. Dollar

(Kitco News) - Gold prices ended the U.S. day session higher and scored a 3.5-month high Wednesday.
Downbeat U.S. retail sales and Federal Reserve data released today, bullish technical charts and a slumping U.S. dollar index all worked in favor of the precious metals bulls. Silver notched a four-month high Wednesday. December Comex gold was last up $20.00 at $1,185.40 an ounce. December Comex silver was last up $0.213 at $16.12 an ounce.

The key data points in the U.S. Wednesday were the retail sales report for September and the Fed’s beige book—both of which fell into the dovish U.S. monetary policy camp. Retail sales came in at up 0.1%. The overall sales figure was expected to be up 0.2% versus up 0.2% in August. Revisions to the previous months and other internals of the retail sales report were also disappointing. The Fed’s beige book, released in the afternoon, showed a weakening U.S. manufacturing sector. The negative readings provide further ammunition for the monetary policy doves, who want the Federal Reserve to hold off on raising interest rates until next year, at the earliest.

There were also reports overnight that consumer demand for gold in China has seen a significant increase lately.

The U.S. dollar index has been trending lower the past three-weeks and closed at a seven-week low close today. The flagging greenback is a bullish “outside market” force that has been working in favor of the precious metals bulls recently.

World stock markets were mostly weaker Wednesday, following some more downbeat economic news coming out of China, the world’s second-largest economy and the world’s leading raw commodity importer. China’s consumer price index rose 1.6% in September, year-on-year, compared to a rise of 2.0% in August. This data falls into the camp of market watchers that are worried about worldwide price deflation. Deflation is the archenemy of raw commodity and stock market bulls.

There was also disappointing economic news coming out of the European Union Wednesday. Industrial output in the Euro zone declined by 0.5% in August from July, and was up 0.9%, year-on-year. The numbers were in line with market expectations.

Technically, December gold futures prices closed near the session high today. The bulls have the overall near-term technical advantage and gained more power today. Prices also pushed above the key 200-day moving average for the first time since last May. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,200.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,150.00. First resistance is seen at today’s high of $1,180.30 and then at $1,190.00. First support is seen at $1,169.80 and then at today’s low of $1,162.50. Wyckoff’s Market Rating: 6.0

December silver futures prices closed near the session high today. The silver market bulls have the near-term technical advantage. A bullish pennant pattern has formed on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $16.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.25. First resistance is seen at today’s high of $16.155 and then at $16.25. Next support is seen at $16.00 and then at today’s low of $15.79. Wyckoff's Market Rating: 6.0.

December N.Y. copper closed up 255 points at 241.30 cents today. Prices closed near the session high today on short covering. Copper bears still have the overall near-term technical advantage. However, prices have been trending higher for the past two weeks. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the September high of 249.30 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the August low of 220.25 cents. First resistance is seen at today’s high of 241.65 cents and then at last week’s high of 243.75 cents. First support is seen at this week’s low of 237.70 cents and then at 235.00 cents. Wyckoff's Market Rating: 3.0.

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