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P.M. Kitco Metals Roundup: Gold Soars to 5-Mo. High on Bernanke Boost and on Fresh Upside Technical Momentum

Friday August 31, 2012 2:24 PM

Comex gold futures prices on Friday rallied sharply, hit a fresh five-month high and are now within easy striking distance of $1,700.00. The precious metals markets took flight late Friday morning following the much-anticipated remarks by Federal Reserve Chairman Ben Bernanke at a Fed symposium in Jackson Hole, Wyoming. The Fed chief strongly hinted fresh, unconventional U.S. monetary policy stimulus will be implemented at some point. Indeed, he left the door wide open for a fresh quantitative easing initiative to be unveiled at the September FOMC meeting, or at some point in the not-too-distant future. December gold last traded up $32.00 an ounce at $1,689.00. Spot gold last traded up $31.70 at $1,687.50. December silver last traded up $1.05 an ounce at $31.49.

The heightened expectations for fresh quantitative easing (QE3) are music to most commodity market bulls’ ears, including gold and silver. It’s also stock-market-bullish and U.S. dollar-bearish.

Friday is the last trading day of the month, which makes it an extra important trading day from a technical perspective—and the gold and silver bulls even took full advantage of that by pushing prices to multi-month highs. The gold and silver bulls gained fresh, solid upside technical momentum Friday, to suggest that prices can continue to trend sideways to higher for at least the near term.

In other overnight news, there was more weak economic data coming out of the European Union. The EU unemployment rate rose to 11.3% in July, while inflation checked in at 2.6% in August, on an annualized rate, which was higher than expected. There were also rumors and rumblings in the market place that a German finance official was going to resign, which led to further speculation that European Union monetary policy will soon be eased further. We’ll find out more next Thursday when the monthly meeting of the European Central Bank occurs, including a highly awaited press conference from ECB head Mario Draghi. The market place does expect the ECB to announce a fresh monetary stimulus package soon.

The U.S. dollar index was solidly lower Friday. Prices hit a fresh 3.5-month low and closed at a technically bearish weekly and monthly low close. The greenback bears have the near-term technical advantage and gained more downside momentum Friday as a five-week-old downtrend line is in place on the daily bar chart. Meantime, crude oil prices were solidly higher Friday on the QE3 hopes. Oil bulls still have the near-term technical advantage. The precious metals markets will continue to look closely at how these two key “outside markets” trade on a daily basis.

(NOTE: My mission at Kitco is not only to provide you, my valued reader, with market analysis and perspective, but to also help you become a better-educated investor/trader. To that end I will soon be producing unique analytical/technical charts on the major world FOREX currency pairs. These charts will be very similar to the precious metals charts I now produce for Kitco. Holders of precious metals or other major tradable (fungible) assets worldwide need to monitor the foreign exchange rate of the currency in which their asset is held. Also, the precious metals market prices are impacted on a day-to-day basis by currency movements. If you have a better handle on what the major currencies are doing (or where they may be headed), then you will have more market knowledge and will likely become a more profitable investor or trader. Importantly, understanding the FOREX market may seem too complicated to many. However, I will make it my job to simplify it with my easy-to-understand analysis and with continuing education via Kitco.—Jim)

The London P.M. gold fixing is $1,648.50 versus the previous P.M. fixing of $1,660.50.

Technically, December gold futures bulls had a big field day today and gained solid technical power. Prices hit a fresh five-month high, scored a big and bullish “outside day” up on the daily bar chart, closed at a bullish weekly and monthly high close--and last but not least saw a big upside “breakout” from a  bull flag pattern that had formed on the daily chart, which I had pointed out to you all week long. Gold prices are in a two-month-old uptrend on the daily bar chart. The gold market bulls have the solid overall near-term technical advantage. The gold bulls’ next upside price breakout objective is to produce a close above psychological resistance at $1,700.00. Bears' next near-term downside price objective is closing prices below solid technical support at today’s low of $1,647.10. First resistance is seen at $1,700.00 and then at $1,704.50. First support is seen at $1,679.30 and then at $1,675.00. Wyckoff’s Market Rating: 7.5

December silver futures prices closed sharply higher, near the session high and hit a fresh four-month high Friday. Prices also closed at a bullish weekly and monthly high close--and last but not least saw a big upside “breakout” from a bullish pennant pattern that had formed on the daily chart, which I had pointed out to you all week long. Silver bulls have the overall near-term technical advantage and gained more technical power today. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $32.50 an ounce. The next downside price breakout objective for the bears is closing prices below major psychological support at $30.00. First resistance is seen at Friday’s high of $31.59 and then at $32.00. Next support is seen at $31.315 and then at $31.00. Wyckoff's Market Rating: 7.5.

Follow me on Twitter! If you want daily, or nightly, up-to-the-second market analysis on gold and silver price action, then follow me on Twitter. It's free, too. My account is @jimwyckoff .


By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

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 precious metal products, 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.

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