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Gold Prices Soar $25 On Technical Buying, Sinking U.S. Dollar

Jim Wyckoff  

(Kitco News) - Gold prices ended the U.S. day session sharply up and hit a two-week high Wednesday. A slumping U.S. dollar index this week and chart-based buying were featured. Buy stop order were triggered in the gold and silver futures markets when near-term technical resistance levels were breached. April Comex gold futures were last up $27.00 an ounce at $1,357.40. March Comex silver was last up $0.367 at $16.895 an ounce.

A volatile day in the U.S. stock market also helped to lift safe-haven gold.

The big U.S. economic report of the week on Wednesday saw the consumer price index report come in hotter than expected. CPI for January came in at up 0.5% from December and up 2.1%, year-on-year. The closely watched “core” rate (minus food and energy prices) came in at up 0.3% from December and up 1.8%, year-on-year. The consensus forecasts for CPI were at up 0.4% from December and up 1.9% year-on-year. The core inflation rate was seen coming in at up 0.2% from December and up 1.7%, year-on-year.

The CPI report falls into the camp of the U.S. monetary policy hawks, who would like to see the Federal Reserve raise interest rates at a faster pace: likely four small increases in 2018.

Gold prices initially sold off on the CPI data. However, when the stock market sold off and became volatile the gold market quickly moved higher. It could also be that on second-thought the market place did not deem the CPI report as indicating problematic inflation is on the horizon.

A downbeat U.S. retail sales report on Wednesday also helped to rally the gold and silver markets. That report favored the U.S. monetary policy doves.

The other outside market on Wednesday saw Nymex crude oil prices higher. Still, the big increase in U.S. shale oil production is likely to limit the upside in oil markets in the coming weeks.

Live 24 hours gold chart [Kitco Inc.]

Technically, April gold futures prices closed the day session near the session high and scored a big and bullish “outside day” up on the daily bar chart. The gold bulls have the overall near-term technical advantage and gained more power today. A three-week-old downtrend on the daily bar chart was soundly negated today. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at the January high of $1,370.50. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,320.00. First resistance is seen at $1,360.00 and then at $1,370.50. First support is seen at $1,350.00 and then at $1,340.00. Wyckoff's Market Rating: 7.0

Live 24 hours silver chart [ Kitco Inc. ]

March silver futures prices closed near the session high and scored a big and bullish “outside day” up on the daily bar chart. The silver bears still have the slight overall near-term technical advantage. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at $17.00 and then at $17.25. Next support is seen at $16.75 and then at $16.50. Wyckoff's Market Rating: 4.5.

March N.Y. copper closed up 705 points at 323.35 cents today. Prices closed near the session high on heavy short covering and bargain hunting. The copper bulls have the overall near-term technical advantage and gained more power today. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the December high of 323.65 cents. The next downside price objective for the bears is closing prices below solid technical support at the February low of 302.60 cents. First resistance is seen at 325.75 cents and then at 327.90 cents. First support is seen at 320.00 cents and then at 315.00 cents. Wyckoff's Market Rating: 7.0.

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