Gold Sees Price Pressure from Profit Taking, Powerful Greenback
New York (Jan 26) Gold prices ended the U.S. day session moderately lower Monday, on profit-taking from recent gains that saw prices last week hit a 5.5-month high, and on a strong U.S. dollar index that notched a 12-year high Monday. February Comex gold was last down $13.40 at $1,279.30 an ounce. Spot gold was last down $14.80 at $1,279.75. March Comex silver last traded down $0.345 at $19.955 an ounce.
The featured element in the market place Monday was news the Greek anti-austerity party won elections by a wider-than-expected margin Sunday. The Syriza party’s victory raises more concerns about the viability of the European Union, longer-term. A main question is how long will the Germans put up with other EU countries that can’t get their own financial/economic house in order? This summer Greece will need another big infusion of funding from the EU, to stay solvent. Gold prices had rallied last week, in anticipation of such an outcome. However, the classic “buy the rumor, sell the fact” trading maxim proved correct today.
World markets took the news from Greece fairly well, which was also a negative for safe-haven gold. European stocks were mixed, while U.S. stock indexes were firmer in afternoon trading. The Greek news was partially offset by an upbeat German Ifo business confidence index reading Monday that came in at 106.7 in January from 105.5 in December. The data suggests the German economy is on the upswing.
Focus on Greece will not last long as other important matters are on the horizon, including the regular meeting of the U.S. Federal Reserve’s Open Market Committee (FOMC), which begins on Tuesday and ends Wednesday afternoon. Traders will look for clues coming from that meeting, regarding when the U.S. central bank will begin to raise interest rates. Recent developments, including plunging crude oil prices, have led many to believe the Fed might not raise interest rates until late this year, or may have to wait until 2016.
The Chinese currency, the yuan, fell to a multi-month low Monday, as China’s central bank weighs monetary stimulus measures to jumpstart its flagging economy. The Russian ruble faced more downside pressure against world currencies Monday, following weekend fighting in Ukraine and the threats of more sanctions against Russia coming from the U.S. and European Union. The U.S. dollar index pushed to another 11-year high Monday, on safe-haven demand for U.S. dollar-backed assets.
Nymex crude oil prices slumped to nearly six-year low overnight. Nearby crude oil futures dropped below $45.00 a barrel as the steep downdraft in prices continues.
U.S. economic data out Monday was light and included the Texas manufacturing survey.
Trading volumes could be lighter Tuesday and Wednesday, as New York City is set to get hit by potentially one of the biggest blizzards on record.
The London P.M. gold fixing is $1,281.25 versus the previous A.M. fixing of $1,282.75.
Technically, February gold futures prices closed nearer the session low on profit taking from recent gains. Prices last week hit a 5.5-month high. The gold bulls still have the near-term technical advantage. Prices are in a two-month-old uptrend on the daily bar chart. Their next upside near-term price breakout objective is to produce a close above solid technical resistance at the August 2014 high of $1,323.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,256.20. First resistance is seen at $1,290.00 and then at $1,300.00. First support is seen at today’s low of $1,275.60 and then at last week’s low of $1,272.10. Wyckoff’s Market Rating: 6.0
March silver futures prices closed nearer the session low and scored a bearish “outside day” down on the daily bar chart today. Profit taking was featured. Silver bulls still have the near-term technical advantage. Prices are in a two-month-old uptrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $19.00 an ounce.