Gold Weakens Late on Profit Taking After Hitting 11-Week High Early On
New York (Jan 13) Gold prices were modestly lower in afternoon U.S. trading Tuesday, on some profit taking from recent gains. However, prices did score an 11-week high in overnight trading. Safe-haven demand amid market jitters related to plunging crude oil prices and chart-based buying were featured during most of the trading session Tuesday, before the profit taking set in February Comex gold was last down $3.80 at $1,229.10 an ounce. Spot gold was last down $5.30 at $1,228.50. March Comex silver last traded up $0.446 at $16.995 an ounce.
Crude oil prices were again lower Tuesday and fell to a nearly six-year low overnight. A United Arab Emirates OPEC minister reportedly said the cartel will not reduce its collective output. Crude prices fell on that news, with February Nymex crude dropping to $44.20 a barrel. Plummeting oil prices are good for consumers at the gasoline pumps, but the markets are anxious due to the potential upheaval that sharply lower oil prices could create. This is prompting safe-haven demand for gold.
The U.S. dollar index was higher and is near last week’s 10-year high. While certainly not a positive for the raw commodity sector, the stronger greenback appears to be having less daily impact on raw commodity market prices, including the precious metals.
In overnight news, a report showed consumer inflation in the U.K. was at a 10-year low in December. The steep drop in crude oil prices is blamed for the U.K. inflation reading coming in at up 0.5% in December from up 1.0% in November, year-on-year. Meantime, Greece reported its consumer price index at minus 2.6% in December, year-on-year. Many market watchers are now reckoning the downdraft in crude oil prices will prompt the U.S. Federal Reserve to hold off on raising U.S. interest rates due to the deflationary implications of the sharp decline in oil prices and troubles in the European Union. Economic readings in the EU are already hinting at deflation knocking on the door.
The next major data point coming into focus for traders and investors is the January 22 meeting of the European Central Bank. The specter of price deflation and rhetoric coming from ECB officials suggest the central bank will soon initiate monetary stimulus in the forming of quantitative easing.
The very low inflation in the EU and the likely ECB quantitative easing drove Italian bond yields to record lows Tuesday. This comes despite Italy being grouped in the EU countries that still have major debt and financial problems. Many would agree this scenario is very troubling for the EU.
U.S. economic data out Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the monthly Treasury budget statement, a report from the World Bank on world economic prospects, and the NFIB small business index.
The London P.M. gold fix is $1,231.50 versus the previous A.M. fixing of $1,239.00.
Technically, February gold futures prices closed nearer the session low and did hit a fresh 11-week high today. The gold bulls still have some upside momentum and now have the slight near-term technical advantage. Bulls are working on establishing a price uptrend. Their next upside near-term price breakout objective is to produce a close above solid technical resistance at the October high of $1,256.20. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00. First resistance is seen at $1,239.00 and then at today’s high of $1,244.50. First support is seen at $1,223.30 and then at this week’s low of $1,217.50. Wyckoff’s Market Rating: 5.5
March silver futures prices closed nearer the session high and hit a four-week high today. Prices today saw a bullish upside “breakout” from a choppy trading range on the daily bar chart. Silver bulls and bears are now back on a level near-term technical playing field, but the bulls have momentum on their side. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the December high of $17.355 an ounce.
Source: KitcoNews
