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Easy Fed Gives Gold, Silver Prices Rocket Fuel

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(Kitco News) - Gold and silver prices are sharply higher in early morning U.S. trading Thursday. Gold powered to a five-year high, while silver prices hit a five-week high. Major central banks that are leaning easy on their monetary policies are boosting the metals and the raw commodity sector, in general. Gold is also seeing increased safe-haven buying interest as tensions in the Persian Gulf are on the rise. August gold futures were last up $37.50 an ounce at 1,386.50. July Comex silver prices were last up $0.417 at $15.385 an ounce.

Traders and investors are still digesting Wednesday’s conclusion of the Federal Open Market Committee (FOMC) meeting that saw no change in U.S. interest rates, but the Fed did lean significantly more dovish. The FOMC statement said the committee would lower interest rates in the coming months if U.S. economic growth begins to slow down. The FOMC expects the U.S. economic expansion to continue but “uncertainties about this outlook have increased,” the statement said. About half of the FOMC members now expect the Fed to make at least one interest rate reduction this year. The FOMC statement also eliminated the word “patient” from its monetary policy stance.

Markets are continuing to react to the dovish Fed meeting and also to European Central Bank President Mario Draghi’s easy stance on monetary policy in comments he made earlier this week. The U.S. dollar index has sold off, the Euro currency has rallied, crude oil prices have surged and U.S. stock indexes have pushed higher and within easy striking distance of their record highs. European and Asian stock indexes were also mostly higher overnight.

The Bank of England and Bank of Japan also hold their regular monetary policy meetings yet this week.

Gold is also seeing safe-haven demand today on reports Iran’s military shot down a U.S. military drone in Iranian territory. Also, a missile struck a Saudi Arabian water plant, and Iran is being blamed. The U.S.-Iran stare-down just got ratcheted up another notch. President Trump is now likely closer than ever to unleashing some degree of a military operation against Iran. It’s a good bet this situation will get worse before it gets better.

The key “outside markets” today see Nymex crude oil prices solidly higher and trading just above $55.00 a barrel. Meantime, the U.S. dollar index is lower on good follow-through selling from solid losses posted Wednesday afternoon in the wake of the dovish FOMC statement. 

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, leading economic indicators and international transactions (current account).

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls have the solid overall near-term technical advantage and gained more power today. Prices are in a seven-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $1,400.00. Bears' next near-term downside price breakout objective is pushing August futures prices below solid technical support at $1,361.50. First resistance is seen at $1,390.00 and then at today’s high of $1,397.70. First support is seen at $1,375.00 and then at $1,370.00. Wyckoff's Market Rating: 8.5

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures bulls now have the overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $16.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.625. First resistance is seen at the overnight high of $15.40 and then at $15.50. Next support is seen at $15.25 and then at the overnight low of $15.12. Wyckoff's Market Rating: 6.0.

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