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P.M. Kitco Metals Roundup: Gold Rallies on Weak U.S. GDP Report; FOMC Also a Bit Friendly

Wednesday January 30, 2013 2:50 PM

Gold prices ended the U.S. day session with solid gains and near the session high Wednesday. Precious metals were supported by a weaker-than-expected U.S. gross domestic product report and a friendly Federal Open Market Committee meeting statement Wednesday afternoon. Heavy short covering and bargain hunting were featured in gold and silver. February gold last traded up $16.30 at $1,677.10 an ounce. Spot gold was last quoted up $14.20 at $1,678.50.  March Comex silver last traded up $0.931 at $32.115 an ounce.

The big news of the day for the precious metals was a surprisingly weak U.S. economic report. Fourth-quarter U.S. GDP contracted by 0.1% on an annual basis. It is the first U.S. GDP decline in over three years. The market place was expecting the figure to be up 1.0%. The gold and silver markets popped higher immediately following the GDP report, on ideas the weak data will prompt the Federal Reserve to adhere to is very easy money policies presently in place.

Then on Wednesday afternoon the two-day FOMC meeting ended with its official policy statement indicating still-tepid U.S. economic growth that suggests the central bank will keep its monetary policy very easy, including continuing to purchase government bonds.
Most market watchers expected the Fed to keep U.S. monetary policy unchanged. However, traders also were watching for any nuances that were included in the Fed statement, which could provide early clues on when the Fed will stop its asset purchases. The market place read on Wendesday’s FOMC is that the Fed will have to continue to fight sluggish economic growth with very accommodative monetary policy.

Reports Wednesday said Israeli Air Force jets struck a weapons convoy traveling from Syria into Lebanon Tuesday. That news may have also added to some safe-haven demand for gold Wednesday.

Overnight, it was reported Euro zone consumer sentiment continues to creep higher, according to the latest figures released from the European Commission Wednesday. The Euro currency continues to rally and hit a fresh 13-month high against the U.S. dollar Wednesday, amid better investor sentiment toward the European Union and its handling of its sovereign debt crisis.

The U.S. dollar index was solidly lower Wednesday and hit a fresh five-week low.
The dollar bears hold the solid overall near-term technical advantage, which is an underlying supportive factor for the precious metals. Nymex crude oil futures prices were firmer Wednesday and hit a fresh 4.5-month high overnight. The crude oil bulls have upside near-term technical momentum and that, too, is a bullish underlying factor for the metals markets. It’s very possible that as Nymex crude oil prices approach the psychological level of $100.00 it would be a bullish development for the gold and silver markets as well as most other commodity markets. Crude oil is arguably the price leader of the raw commodity sector.

The London P.M. gold fixing is $1,677.50 versus the previous London P.M. fixing of $1,663.50.

Technically, February gold futures prices closed nearer the session high Wednesday. Bulls have regained the slight near-term technical advantage as they now have some upside momentum on their side. The gold bulls’ next upside price breakout objective is to produce a close above solid technical resistance at $1,700.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at this week’s low of $1,651.00. First resistance is seen at Wednesday’s high of $1,683.00 and then at $1,695.40. First support is seen at $1,670.00 and then at Wednesday’s low of $1,661.80. Wyckoff’s Market Rating: 5.5

March silver futures prices closed nearer the session high again Wednesday on more short covering and bargain hunting. Silver bulls have the near-term technical advantage and gained some more upside momentum Wednesday. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $32.485 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at this week’s low of $30.745. First resistance is seen at Wednesday’s high of $32.30 and then at $32.485. Next support is seen at $31.75 and then at $31.50. Wyckoff's Market Rating: 6.0.

March N.Y. copper closed up 585 points at 375.00 cents Wednesday. Prices closed nearer the session high and closed at a fresh 3.5-month high close. Copper bulls gained upside technical momentum and now have the overall near-term technical advantage. Prices are in a choppy 10-week-old uptrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the September high of 384.80 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of 364.05 cents. First resistance is seen at the January high of 375.90 cents and then at 377.50 cents. First support is seen at 372.00 cents and then at 370.00 cents. Wyckoff's Market Rating: 6.0.

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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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