A.M. Kitco Metals Roundup: Comex Gold Sharply Higher as U.S. Dollar Sees More Selling Pressure in Wake of "QE"

4 November 2010, 8:26 a.m.
By Jim Wyckoff
Of Kitco News
www.kitco.com

Comex gold prices are trading sharply higher Thursday morning, hitting a fresh three-week high, in what has been a volatile past 18 hours of trading. In the wake of the highly anticipated FOMC quantitative easing announcement Wednesday afternoon, the U.S. dollar index has come under more strong selling pressure, which has brought keen investor buying interest back into the gold market. December Comex gold last traded up $35.00 at $1,372.60 an ounce. Spot gold was last quoted up $23.50 at $1,372.75.

Wednesday afternoon's Federal Reserve's FOMC statement roiled many markets at first. The $600 billion initial stimulus package was on the high end of market expectations. However, markets overnight appear to have come to the consensus that the U.S. government wants to continue to deflate its currency by printing dollars. Investors worldwide also now reckon the U.S. stimulus move by the Federal Reserve was unilateral and may serve to unsettle other major industrial nations. This scenario is fully U.S. dollar bearish and gold/silver market bullish.

The U.S. dollar index is trading solidly lower Thursday morning after setting a fresh 11-month low in late trading Wednesday. The dollar index remains technically and fundamentally very weak, which has been and continues to be bullish for the precious metals. The value of the U.S. dollar against the other major currencies will continue to be an important market factor for the precious metals. Any strong rebound in the U.S. dollar index in the near term would likely only be temporarily bearish for gold, to likely produce a significant downside near-term "correction" in an overall price uptrend. However, the gold market has enough strong fundamental and technical factors in its favor that even a sustained near-term rally in the U.S. dollar index is not likely to change the overall bullish posture of the gold market.

U.S. economic data due for release Thursday includes weekly jobless claims and preliminary productivity and costs for the third quarter. Traders are now awaiting Friday morning's U.S. jobs report. In the wake of QE and Friday's employment report, how the precious metals markets close on Friday (near the weekly high or near the weekly low) could well set the tone for trading action into the end of the year.

The London A.M. gold fixing was $1,361.00 versus the previous London P.M. fixing of $1,345.50.

Technically, gold bulls have the solid overall near-term and longer-term technical advantage and have this week gained fresh upside near-term technical momentum to re-establish a 13-week-old uptrend on the daily bar chart for December Comex gold.

Gold bulls' next near-term upside technical objective is to produce a close in December futures above solid technical resistance at the all-time record high of $1,388.10. Bears' next near-term downside price objective is closing prices below solid technical support at $1,315.60. First resistance is seen at $1,375.00 and then at $1,388.10. Support is seen at the overnight low of $1,346.70 and then at $1,340.00. Today's near-term Fibonacci support/resistance level: $1,361.00.

December silver futures last traded up 107.4 cents at $25.51 an ounce Thursday morning. Silver bulls have the solid overall near-term technical advantage and have gained fresh upside near-term technical momentum this week. The next downside price objective for the bears is closing prices below solid technical support at this week's low of $23.935. Bulls' next upside price objective is producing a close above solid technical resistance at $26.00 an ounce. First resistance is seen at $25.75 and then at $26.00. Next support is seen at the overnight low of $25.25 and then at $25.00. Today's near-term Fibonacci support/resistance level: $24.51.

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

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