(Kitco News) - Gold prices saw a moderate short-covering and bargain-hunting bounce in the aftermath of the European Central Bank easing its monetary policy Thursday. The ECB move was not unexpected but did prompt big price reversals in the U.S. dollar index (down) and the Euro currency (up) on this day. That led to the rebound in gold after its price overnight dropped to a 5.5-year low. Silver prices hit a six-year low Thursday. February Comex gold was last up $7.80 at $1,061.50 an ounce. March Comex silver was last up $0.096 at $14.105 an ounce.
The regular meeting of the ECB saw the central bank make its easing move, lower the deposit rate by 0.1%. Mario Draghi’s ensuing press conference was deemed by many European market watchers as not going far enough in the ECB’s easing measure.
What is surprising is that the Euro currency rallied sharply and the dollar index sold off sharply. This is a classic “buy the rumor, sell the fact” scenario for the USDX and a “sell the rumor, buy the fact” for the Euro currency. Don’t be surprised if the same contrary effect occurs if the FOMC raises its interest rates on December 16.
The marketplace was still digesting some data and comments from the U.S. Federal Reserve Wednesday. While containing no surprises, the Fed’s beige book and comments from Fed Chair Janet Yellen reinforced notions the U.S. central bank will slightly raise U.S. interest rates in two weeks—for the first time in nine years. This did limit stronger buying interest in gold and silver markets Thursday. Yellen delivered a speech and testimony on the economy to U.S. lawmakers Thursday, but it was pretty much in line with what she said Wednesday.
The important U.S. jobs report is due out Friday. The key non-farm payrolls number is expected to be up around 205,000 in November. An OPEC oil cartel meeting also begins Friday and will be closely watched by the marketplace. There is talk Saudi Arabia may propose a collective oil-production cut for 2016, with the stipulation that non-OPEC members also cut their production levels. Most believe such a plan is a non-starter.
Technically, February gold futures prices closed nearer the session high today and did hit another contract and a 5.5-year low early on. Gold prices are still in a six-week-old downtrend on the daily bar chart. Bears still have the solid near-term technical advantage and there are no early clues of a market bottom being close at hand. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,080.50. Bears' next near-term downside price breakout objective is pushing prices below solid longer-term technical support at 1,000.00. First resistance is seen at $1,062.40 and then at Wednesday’s high of $1,071.00. First support is seen at $1,050.00 and then at today’s contract low of $1,045.40. Wyckoff’s Market Rating: 1.5
March silver futures prices closed nearer the session high on short covering after hitting a contract and six-year low early on today. The silver market bears still have the solid overall near-term technical advantage. Prices are in a five-week-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $14.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $13.00. First resistance is seen at this week’s high of $14.24 and then at $14.44. Next support is seen at today’s contract low of $13.805 and then at $13.50. Wyckoff's Market Rating: 1.0.
March N.Y. copper closed up 285 points at 206.10 cents today. Prices closed nearer the session high on short covering. The key “outside markets” were fully bullish for copper today as the U.S. dollar index was sharply lower and crude oil prices were solidly higher. Copper bears still have the firm overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 220.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 200.00 cents. First resistance is seen at this week’s high of 208.85 cents and then at 210.00 cents. First support is seen at today’s low of 202.55 cents and then at the contract low of 200.20 cents. Wyckoff's Market Rating: 1.5.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff
