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Jim Wyckoff P.M. Kitco Metals Roundup: Comex Gold Rallies on Fresh Inflationary Concerns, Improving Technical Posture

08 February 2011, 02:24 p.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) - Comex gold futures closed solidly higher and hit a fresh three-week high Tuesday. Worries about inflationary pressures increasing worldwide worked to boost the safe-haven yellow metal after news that China raised its interest rates overnight. Comex April gold last traded up $16.30 at $1,364.50 an ounce. Spot gold last traded up $12.10 at $1,364.75.

Many commodity markets initially felt selling pressure Tuesday morning on the overnight news that China has raised key interest rates by around 0.25% in a move to curb domestic demand for commodities and reduce inflationary pressures. While the China rate hike news was not surprising, the timing did catch the markets off guard. The talk in the market place was that once China came back from its Lunar new year holiday, fresh demand for commodities from China would stoke the already bullish raw commodity sector.

While some commodity markets were initially pressured on the idea that higher interest rates in China would crimp demand, traders soon reckoned demand for raw commodities from China will remain strong. Gold traders, in particular, focused on the inflationary aspects of the China rate hike being bullish for gold.

The U.S. dollar index traded weaker Tuesday morning, and that was an underlying bullish factor for the precious metals. The dollar index bulls had gained some fresh upside technical momentum recently, but need to show fresh power very soon to keep it. If the dollar index can work sideways to higher in the near term, that would also be a bearish factor for the precious metals.

The London P.M. gold fix was $1,363.50 versus the previous P.M. fixing of $1,347.50.

Technically, April Comex gold futures prices closed nearer the session high Tuesday. The gold market bulls Tuesday gained fresh upside near-term technical momentum by pushing April futures prices to a fresh three-week high of $1,368.70 an ounce. The gold market has rallied well up from the late-January low of $1,309.10, basis April futures.

The gold market bulls have the overall near-term and longer-term technical advantage. Bulls' next near-term upside technical breakout objective is to produce a close above solid technical resistance at $1,380.00. Bears' next near-term downside price breakout objective is closing prices below solid trend-line support at the $1,340.00 area. First resistance is seen at Tuesday's high of $1,368.70 and then at $1,375.00. Support is seen at $1,361.00 and then at $1,355.00. Wyckoff's Market Rating: 6.5.

March silver futures closed up 90.2 cents at $30.245 an ounce Tuesday. Prices closed near the session high and hit a fresh five-week high. The bulls have gained strong upside technical momentum recently, including more power Tuesday. Prices are in a steep two-week-old uptrend on the daily bar chart.

The silver bulls have the overall near-term and longer-term technical advantage. The next downside price breakout objective for the bears is closing prices below solid technical support at $29.00. Bulls' next upside price breakout objective is producing a close above solid technical resistance at the January contract and 30-year high of $31.27 an ounce. First resistance is seen at $30.50 and then at $31.00. Next support is seen at $30.00 and then at $29.49. Wyckoff's Market Rating: 8.0.

March N.Y. copper closed up 10 points at 457.60 cents Tuesday. Prices closed nearer the session high and saw mild profit taking after China raised its interest rates. However, prices did rebound by the close on notions demand from China will remain very strong.

The copper bulls still have the solid near-term technical advantage. Bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 475.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 440.00 cents. First resistance is seen at Tuesday's high of 459.75 cents and then at Monday's record high of 463.75. First support is seen at 455.00 cents and then at Tuesday's low of 450.60 cents. Wyckoff's Market Rating: 8.0.

 

 

By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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