Gold Weaker, But Well Up From Daily Lows, Amid Risk-On Trading Day

Jim Wyckoff

 Wednesday March 01, 2017 13:45

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(Kitco News) - The gold market lost some ground Wednesday, but the bulls should not be too disappointed given all the elements that were working against the yellow metal on this day. Gold prices rebounded well off the daily lows and were trading near the session highs by afternoon trading. More profit-taking pressure was seen from the shorter-term futures traders after prices Monday hit a 3.5-mongh high. A big “risk-on” trading day in the world marketplace and some hawkish “Fed speak” were negatives for the safe-haven metal today. A stronger U.S. dollar today was also bearish for the precious metals markets. April Comex gold was last down $4.50 an ounce at $1,249.50. May Comex silver was last up $0.026 at $18.495 an ounce.

Tuesday evening’s speech by U.S. President Donald Trump to the U.S. Congress was deemed to be very optimistic and much more “presidential” than some of his campaign or press conference rhetoric, and that worked to assuage the world marketplace and add to a big “risk-on” trading mentality in markets Wednesday. World stock markets were mostly higher Wednesday, with U.S. stock indexes scoring their best daily gains of the year and soaring to record highs.

U.S. Federal Reserve officials, including Chair Janet Yellen, are speaking this week. New York Fed President William Dudley on Tuesday said the case for raising U.S. interest rates “has become a lot more compelling.” San Francisco Fed President John Williams also said on Tuesday that a March rate hike is “very much on the table for consideration.”  Yellen speaks on Friday.

The more hawkish tone from those Fed officials on Tuesday boosted the U.S. dollar, and pushed up U.S. Treasury bond and note yields as well as government bond yields in Europe.

Many Fed watchers are now placing high odds on the FOMC raising U.S. interest rates in March.

A key U.S. inflation report out Wednesday, the personal consumption expenditures index, rose to an annual rate of 1.9% in February, which is very close (the closest in five years) to the Fed’s goal of achieving 2.0% annual price inflation. The report is said to be the Fed’s favorite inflation gauge. This is another report falling into the camp of the U.S. monetary policy hawks, who want to see rates rise sooner rather than later.

The key “outside markets” on Wednesday saw the U.S. dollar index trading solidly higher and hit a six-week high. Meantime, Nymex crude oil futures prices were slightly lower today. Oil prices are still in a sideways and choppy trading range that has bound that market for several weeks.

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Technically, April gold futures prices closed nearer the session high. The gold bulls have the overall near-term technical advantage. Prices are in a nine-week-old uptrend on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,275.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,225.00. First resistance is seen at this week’s high of $1,264.90 and then at $1,270.00. First support is seen at today’s low of $1,237.20 and then at $1,226.80. Wyckoff's Market Rating: 6.0

May silver futures prices closed nearer the session high. Prices this week have hit a 3.5-month high. The silver market bulls have the firm overall near-term technical advantage. Prices are in a nine-week-old uptrend on the daily bar chart. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $19.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.50. First resistance is seen at this week’s high of $18.54 and then at $18.75. Next support is seen at this week’s low of $18.265 and then at $18.00. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed up 205 points at 273.45 cents today. Prices closed near mid-range. The copper bulls have the firm overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the February high of 283.60 cents. The next downside price objective for the bears is closing prices below solid technical support at 250.00 cents. First resistance is seen at today’s high of 276.85 cents and then at 280.00 cents. First support is seen at today’s low of 270.60 cents and then at last week’s low of 265.25. Wyckoff's Market Rating: 7.0.