Gold Moves Well Up from Daily Low Following Dovish FOMC Minutes
New York (Feb 18) Gold prices moved well up from lower levels, on short covering and bargain hunting, in the aftermath of Wednesday afternoon’s release of the FOMC minutes, which the market place deemed a bit dovish. Most of the session technical selling was featured in gold as prices fell to a six-week low and dropped below what was psychological support at $1,200.00. The key “outside markets” were also in a bearish posture for the precious metals on this day—a firmer U.S. dollar index and lower crude oil prices. However, the greenback did back well down from its daily high following the FOMC minutes’ release.
April Comex gold was last up $1.50 at $1,208.00 an ounce. March Comex silver last traded up $0.112 at $16.495 an ounce.
Wednesday afternoon’s release of the minutes from the latest Federal Open Market Committee (FOMC) meeting of the Federal Reserve said the Fed will remain patient on moving to raise interest rates. The minutes said falling oil prices are a worry for the Fed. The modestly dovish read from the market place now hints there will not be an interest rate hike from the FOMC at the June meeting.
Reports overnight said there has been progress in talks between Greece and the European Union regarding Greece wanting to roll back some of its austerity measures. The reports said the present bailout plan would be extended for six months—meaning Greece will receive immediate funds. This news is deemed slightly bearish for the safe-haven gold market. Greece is on the verge of insolvency and needs a fresh infusion of financing fast. In what has become commonplace on EU sovereign debt matters, this latest issue has just seen the can kicked down the road and the problem will surface again. Many traders and investors have become numb to the EU sovereign debt crisis news, which is now several years old.
In a sign of how European investors feel about the prospects of Greece remaining a viable, payment-honoring EU country, German 10-year bonds on Wednesday sold at a record low average yield of 0.37%. Read that as keen safe-haven demand.
The Ukraine-Russian rebel ceasefire is on the verge of collapse, if it has not already collapsed. There are reports of fighting in some cities in eastern Ukraine. This development has not had a major impact on the markets, which is surprising to many market watchers, and disappointing to the gold market bulls. It’s this writer’s opinion that in the coming weeks and months the Russia-Ukraine conflict, and more specifically Russian actions in the Asian region, will be the major geopolitical problem. The EU debt crisis has been going on for years. While the EU crisis has economic and financial implications and the potential for a world financial market contagion, the Russia situation is potentially much more dangerous. Russian President Vladimir Putin is viewed by most of the Western world as a rogue. Sanctions and plunging crude oil prices have put this major nuclear power and its unpredictable leader in a corner. This matter could well be the major bullish impetus for safe-haven assets such as gold and U.S. Treasuries in the next couple years, or beyond.
China’s Lunar New Year holiday began Wednesday and last for over a week, which could make for quieter markets in Asia during that time.
The London P.M. gold fix was $1,206.00 versus the previous A.M. fixing of $1,206.50.