Gold Hits 3.5-Month High; Bullish Momentum Building; Silver Bulls Also Come to Life

(Kitco News) - Gold prices are higher and hit a 3.5-month high in early U.S. trading Thursday. Add the slumping U.S. dollar index to the list of bullish elements helping to drive gold and silver prices north recently. Silver prices also scored a 3.5-month high Thursday. Safe-haven and technical buying continue to support the yellow metal amid volatile world stock markets that presently have a downside bias. April Comex gold was last up $8.30 at $1,149.60 an ounce. March Comex silver was last up $0.096 at $14.83 an ounce.

World stock markets were mixed to higher Thursday, supported by a rebound in many raw commodity prices, led by crude oil. Oil prices showed solid gains Wednesday but Nymex futures prices were weaker and just below $32 a barrel Thursday. The sharply lower U.S. dollar index the past couple days has helped to lift raw commodity markets. A weak U.S. manufacturing report on Wednesday spiked the dollar index lower, and there is follow-through selling pressure on the greenback Thursday. Most raw commodities on the world market are priced in U.S. dollars. A decline in the value of the dollar makes those commodities less expensive to purchase with non-U.S. currency. U.S. stock indexes were pointed to modestly lower openings Thursday morning.

In other overnight news, the European Central Bank cut its growth projections for the Euro zone Thursday. The ECB cited slowing growth in China and other emerging markets as cutting into Euro zone economic growth. The ECB forecast annual economic growth of 1.7% this year, following a growth rate of 1.6% in 2015. The ECB had earlier forecast 2016 economic growth at 1.8%.

ECB President Mario Draghi on Thursday again warned the world about deflationary price pressures setting in. Draghi said the ECB will maintain its fight against deflation.

The Bank of England at its monetary policy meeting Thursday left its interest rates unchanged, which was expected by the marketplace.

The marketplace is awaiting Friday morning’s U.S. employment report for January. The key non-farms payroll number is expected to be up 185,000 following a strong rise of 292,000 in December.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job cuts report, preliminary productivity and costs, monthly chain store sales, and manufacturers’ shipments and inventory.

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Wyckoff’s Daily Risk Rating: 2.5 (Trader and investor market risk aversion is not elevated today.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 5, with 1 being least risk-averse (most risk-on) and 5 being the most risk-averse (risk-off).

Technically, April gold futures prices are in a six-week-old uptrend on the daily bar chart and recent price action suggests a market bottom is in place and that prices can continue to trend sideways to higher in the near term. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,180.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at this week’s low of $1,115.30. First resistance is seen at $1,155.00 and then at $1,160.00. First support is seen at the overnight low of $1,139.70 and then at $1,130.00. Wyckoff’s Market Rating: 5.0

March silver bulls have gained upside momentum this week and a three-week-old uptrend is in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing December futures prices above solid technical resistance at $15.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.00. First resistance is at the overnight high of $14.88 and then at $15.00. Next support is seen at the overnight low of $14.65 and then at $14.50. Wyckoff's Market Rating: 4.0.

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