Gold Gets Late Lift from Dovish FOMC Minutes

Washingtom (Oct 8)  Gold prices were trading modestly higher in the aftermath of the release of the Federal Reserve’s Open Market Committee (FOMC) minutes early Wednesday afternoon. The Fed expressed increasing concern about weakening world economies, which was deemed a bit dovish by the market place. Gold futures prices were trading around $5.00 lower just before the FOMC minutes’ release, and moved above unchanged after the release of the minutes. December Comex gold was last up $3.10 at $1,215.40 an ounce. Spot gold was last quoted up $6.10 at $1,215.00. December Comex silver last traded up $0.045 at $17.28 an ounce.

The U.S. dollar index sold off and the Euro currency rallied in the aftermath of the FOMC minutes, and that was also a bullish development for the gold market. The market place reckoned the FOMC minutes hint the Fed may have to hold off a bit longer on raising U.S. interest rates, given the increasing concerns about weakening world economies—especially the serious weakness coming out of the European Union.

European and Asian stock markets sold off Wednesday, following the lead of sharp losses in the U.S. stock indexes Tuesday. The FOMC minutes corroborated the increasing concerns about anemic world economic growth. The International Monetary Fund on Tuesday lowered its 2015 world economic growth estimate from 4.0% to 3.8%. The IMF said the European Union would be the main drag on world economic growth. On Wednesday, the Organization for Economic Cooperation and Development  also agreed with the IMF reports by saying world economic growth will remain only modest in the coming months, while EU economic growth has ground to a halt. These concerns  caused risk aversion in the market place that is bearish for equities and bullish for safe-haven assets like gold.

A European Central Bank official Wednesday laid out more specifics on the recently announced ECB plans to implement quantitative easing of its monetary policy. The official added that the present very low inflation rate in the EU is very worrisome.

There was a mildly downbeat report coming out of China Wednesday. The HSBC China services purchasing managers’ index (PMI) fell to 53.5 in September versus 54.1 in August. A reading above 50.0 suggests expansion. China is just now coming back from a week-long holiday.

The London P.M. gold fix was $1,217.00 versus the previous London A.M. fixing of $1,220.00.

Technically, December gold futures bears still have the firm overall near-term technical advantage. Prices are in a three-month-old downtrend on the daily bar chart. However, this week’s price action begins to hint the bears may be exhausted. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,232.70. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at this week’s low of $1,183.00. First resistance is seen at today’s high of $1,221.40 and then at $1,225.00. First support is seen at today’s low of $1,205.10 and then at $1,200.00. Wyckoff’s Market Rating: 2.5

December silver futures  prices closed near mid-range Wednesday. The silver bears have the solid overall near-term technical advantage as prices hover not far above last week’s contract and four-year low. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at Wednesday’s high of $17.465 and then at this week’s high of $17.625. Next support is seen at $17.00 and then at the contract low of $16.64. Wyckoff’s Market Rating: 1.5.

Source:  FORBES