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Gold, Silver Rally In Wake Of FOMC Statement That Sees Tame Inflation

Kitco News

(Kitco News) - Gold and silver prices were solidly higher in early afternoon trading Tuesday, in the immediate aftermath of the FOMC statement that saw a U.S. interest rate increase, as expected. However, market watchers were a bit surprised the Fed is projecting tame inflation prospects for the U.S. in the coming months, or longer. Heavy short covering in the futures markets and bargain buying in the cash markets were featured in gold and silver today, following recent selling pressure that drove both markets to five-month lows on Tuesday. February Comex gold was last up $15.20 an ounce at $1,256.90. March Comex silver was last up $0.412 at $16.08 an ounce.

It was widely expected the Fed would raise U.S. interest rates by 0.25% this afternoon. The FOMC statement said more interest rate increases are likely in the coming months, but said inflation remains surprisingly tame. That is leading some to believe the Fed may not be able to raise interest rates as rapidly as it would like, in the coming months. Fed chair Janet Yellen will also hold what will likely be her final press conference this afternoon. The marketplace will closely examine the Fed’s economic projections for next year, in trying to better anticipate the timing of the central bank’s monetary policy moves in 2018.

The U.S. dollar index sold off further in the wake of the FOMC statement, which further supported the precious metals markets in their rebounds today.

The European Central Bank and Bank of England monetary policy meetings take place on Thursday.

It may be just coincidental (but maybe not) that gold prices were hitting what were then their daily highs in midday trading Wednesday, just as Bitcoin futures were selling off and seeing their trading temporarily halted because of volatility.

The U.S. consumer price index report for November was released Wednesday morning. The CPI was expected to be up 0.4% from October and up 1.8%, year-on-year. The actual numbers were in line to a bit hotter than expected on a yearly basis. However, the closely watched core reading on the CPI—excluding food and energy—was weaker than expected, at up 0.1% from October. The core numbers pressured the U.S. dollar index.

The world markets did not show a significant reaction to the overnight news that a Democrat won the Alabama U.S. Senate seat. Even with the addition of a Democratic U.S. senator, it is still expected by most that the U.S. tax reform legislation working will become law. Reports Wednesday said the House and Senate had agreed upon a bill to vote on.

The other key “outside market” Wednesday saw Nymex crude oil futures prices weaker. Oil bulls still have the overall near-term technical advantage, but there are stiff chart resistance levels just above the market that could cap the uptrend.

Live 24 hours gold chart [Kitco Inc.]

Technically, February gold futures prices were near their daily highs in afternoon trading. The 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 $1,275.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at the July low of $1,214.50. First resistance is seen at $1,260.00 and then at $1,267.00. First support is seen at $1,250.00 and then at today’s low of $1,242.30. Wyckoff's Market Rating: 3.5

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures prices were near the session high Wednesday afternoon. The silver bears still have the firm overall near-term technical advantage. Prices are 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 $16.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the July low of $15.225. First resistance is seen at $16.25 and then at $16.35. Next support is seen at $15.80 and then at $15.65. Wyckoff's Market Rating: 3.0.

March N.Y. copper closed up 290 points at 305.20 cents today. Prices closed nearer the session high on more short covering. The copper bulls and bears are on a level overall near-term technical playing field. Prices are in a seven-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 315.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 290.00 cents. First resistance is seen at today’s high of 305.65 cents and then at 308.00 cents. First support is seen at today’s low of 301.30 cents and then at 300.00 cents. Wyckoff's Market Rating: 5.0.

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 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.