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P.M. Kitco Metals Roundup: Gold Posts Solid Rebound on ECB Rate Cut, Better Investor Risk Appetite

Thursday May 2, 2013 2:03 PM

(Kitco News) - Comex gold futures ended the U.S. day session with solid gains Thursday. Gold decided to act more like a raw commodity than a safe-haven asset Thursday, as the raw commodity sector showed good price gains amid an improved investor risk appetite on this given day. An interest rate cut by the European Central Bank Thursday morning added to bullish sentiment in the raw commodity sector. June Comex gold last traded up $21.10 at $1,467.30 an ounce. Spot gold was last quoted up $9.90 at $1,468.50.  July Comex silver last traded up $0.447 at $23.79 an ounce.

The European Central Bank on Thursday cut its key interest rate by 0.25%, to 0.5%, which was expected by many market watchers. Recent weak EU economic data made the case for such action. Just Thursday it was reported that Euro zone manufacturing activity in April declined. The Markit manufacturing gauge came in at 46.7 in April compared to 46.8 in March. A number below 50 indicates a month-to-month decline in manufacturing activity. ECB president Mario Draghi at this monthly press conference following the ECB meeting said his central bank could even charge a negative interest rate if economic conditions in the EU warrant. That was another bullish signal for safe-haven gold.

The Federal Reserve’s policy-making committee’s FOMC statement on Wednesday contained no major surprises. However, what was read as slightly bullish for the precious metals and for the raw commodity sector is that the Fed made no mention of a timeframe for winding down its quantitative easing program and said it could adjust its bond-buying up or down based on U.S. economic conditions.

The market place now turns its attention to Friday morning’s U.S. jobs report. A weaker-than-expected employment report is likely to be bullish for the precious metals as it would suggest the Federal Reserve will keep its foot heavy on the “easy-money” accelerator.

In Asian news overnight, the HSBC China manufacturing PMI came in at 50.4 in April versus 51.6 in March. This reading follows the official China government PMI reported Wednesday, which was also down from the previous month. The weakening China PMI data this week has been a bearish weight on the raw commodity sector, including the precious metals, as it suggests less demand from the world’s largest consumer of raw commodities.

The U.S. dollar index was sharply Thursday on a corrective rebound after hitting a nine-week low Wednesday. The ECB rate cut was also bullish for the greenback. The dollar index bulls had faded recently. Meantime, Nymex crude oil futures prices were sharply higher Thursday on a corrective bounce from this week’s strong selling pressure and the better investor risk appetite Thursday.

The London P.M. gold fix is $1,469.25 versus the previous P.M. fixing of $1,454.75.

Technically, June gold futures prices closed nearer the session high and gained back most of Wednesday’s losses. Gold prices are still in a seven-month-old downtrend on the daily bar chart and the bears have the overall technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,500.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,400.00. First resistance is seen at Thursday’s high of $1,473.30 and then at this week’s high of $1,479.50. First support is seen at Thursday’s low of $1,448.10 and then at this week’s low of $1,439.70. Wyckoff’s Market Rating: 3.5

July silver futures prices closed near mid-range Thursday. Sharp gains in crude oil Thursday helped to boost silver. Silver bears are still in overall technical control. Prices are in a seven-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $25.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $23.00. First resistance is seen at $24.00 and then at Wednesday’s high of $24.345. Next support is seen at Thursday’s low of $23.37 and then at this week’s low of $23.21. Wyckoff's Market Rating: 3.0.

May N.Y. copper closed up 235 points at 310.60 cents Thursday. Prices closed near mid-range and saw short covering in a bear market. Prices Wednesday hit a fresh 1.5-year low. Copper bears still have the solid overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at last week’s high of 328.20 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the April low of 305.70 cents. First resistance is seen at Thursday’s high of 313.40 cents and then at 315.00 cents. First support is seen at Thursday’s low of 307.05 cents and then at Wednesday’s low of 305.10 cents. Wyckoff's Market Rating: 1.5.

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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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