Gold Firmer on Slumping U.S. Dollar, Weak US Data, Fed Speak and US Equities Sell Off
New York (Mar 25) Gold prices ended the U.S. day session modestly higher and hit a three-week high Wednesday. The yellow metal came within a whisker of pushing above the key $1,200.00 mark, basis April Comex futures. Several fundamental factors worked in favor of the precious metals Wednesday, including a slumping U.S. dollar index that continues to be a major bullish underlying theme for most raw commodity markets. April Comex gold was last up $5.70 at $1,197.00 an ounce. May Comex silver was last up $0.017 at $17.00 an ounce.
A weak U.S. durable goods orders report Wednesday morning allowed the gold market to tack on some additional gains from the overnight session. Durable goods orders in February were down 1.4%, when a rise of 0.2% was expected. Gold also got a lift from bullish comments from Chicago Fed president Charles Evans, who said the Fed should wait until next year to begin to raise interest rates. The sell off in the U.S. stock market Wednesday also was beneficial to the safe-haven gold market.
The key “outside markets” on Wednesday were in a bullish posture for the metals. The U.S. dollar index was lower again and crude oil prices were higher. The dollar index bulls are fading fast and there are early technical clues of a market top in the index. Price action in many commodity futures markets this week has given the bulls some hope that those markets are at or near price bottoms.
Meantime, Nymex crude oil futures were higher despite some bullish U.S. storage reports. When a market cannot rally on bullish fundamental news, it’s a clue that all the bearish fundamentals have been factored into prices. This week’s U.S. storage data showed U.S. stockpiles of oil at an 80-year high.
Those bulls awaiting the raw commodity sector to finally bottom out and start to trend higher need to keep a close eye on the Goldman Sachs Commodity Index (GSCI), which is a basket of several raw commodity futures market prices rolled into a composite index price. When the daily GSCI chart starts to show a price uptrend developing, that will be an early clue the sector has made the bullish turn north. My bias is that such will occur in the next few months, if not sooner.
The European Union got another upbeat economic report this week, as the German Ifo business confidence index rose for the fifth month in a row in March. The Ifo index reading of 107.9 is the highest since July of last year. The report suggests the quantitative easing of EU monetary policy is having some positive impact.
The London P.M. gold fixing is $1,195.60 versus the previous A.M. fixing of $1,192.55.