Gold Rallies On "Buy The Fact" After Fed Rate Hike
(Kitco News) - Gold prices jumped to higher levels on the day in afternoon trading Wednesday, in the immediate aftermath of a U.S. interest rate increase from the Federal Reserve that was fully expected. This price action is a classic example of a “sell the rumor, buy the fact” market reaction to the expected rate hike from the Fed. The past couple weeks had seen gold prices sell off in anticipation of a rate increase from the Fed. April Comex gold was last up $10.00 an ounce at $1,212.60. May Comex silver was last up $0.232 at $17.15 an ounce.
The FOMC statement was arguably a bit hawkish, but maybe not as hawkish as many expected--indicating there will be three U.S. interest rate increases this year, including the one just announced. The Fed funds rate range now stands at 0.75% to 1.0%.
The U.S. dollar index sold off sharply and U.S. Treasury bonds and notes rallied. U.S. stock indexes also rallied in the wake of the rate increase. This could be a “Goldilocks” scenario where there is no perceived bad news in the FOMC statement. Still, Fed Chair Janet Yellen’s comments at her press conference could be markets-moving.
Other central banks scheduled to hold monetary policy meetings this week include the U.K., Japan, Norway, Indonesia and Turkey. The central banks of the world are shifting from a general posture of easing monetary policy, to one of starting to tighten monetary policy after several years of extraordinarily low interest rates.
The other key outside market on Wednesday saw Nymex crude oil prices higher on a corrective and short-covering bounce after hitting a four-month low Tuesday. The oil market has been in a tailspin, which has somewhat dented worldwide investor and trader risk appetite, and has been a significantly bearish element for much of the raw commodity sector.
There was a heavy slate of U.S. economic data released Wednesday, including the the consumer price index and retail sales. Their numbers were mostly in line with market expectations and had little impact on the markets.
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Technically, April gold futures prices were near the session high in late trading. The gold bears still have the overall near-term technical advantage. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,225.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,182.60. First resistance is seen at today’s high of $1,214.90 and then at $1,217.50. First support is seen at $1,200.00 and then at last week’s low of $1,194.50. Wyckoff's Market Rating: 3.5
May silver futures prices were nearer the session high. Short covering was featured. The silver market bears have the overall near-term technical advantage. Prices are still in a three-week-old downtrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.57 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at $17.31 and then at $17.57. Next support is seen at today’s low of $16.825 and then at $16.70. Wyckoff's Market Rating: 3.0.
May N.Y. copper closed up 290 points at 266.40 cents today. Prices closed nearer the session high and saw more short covering. The copper bulls have regained the slight overall near-term technical advantage. Prices are still in a three-week-old downtrend. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at last week’s high of 270.95 cents. The next downside price objective for the bears is closing prices below solid technical support at 250.00 cents. First resistance is seen at today’s high of 267.30 cents and then at 270.00 cents. First support is seen at today’s low of 263.70 and then at 260.00 cents. Wyckoff's Market Rating: 5.5.