(Kitco News) - Gold prices were solidly higher and poised to close at or near a 13-month high close in late U.S. trading Thursday. Safe-haven demand surfaced as U.S. stock indexes sold off and the U.S. dollar index dropped sharply in the wake of today’s announcement of the monetary policy easing measures from the European Central Bank. April Comex gold was last up $15.10 at $1,272.60 an ounce. May Comex silver was last up $0.214 at $15.58 an ounce.
The highly anticipated regular meeting of the European Central Bank saw the ECB initiate fresh monetary stimulus by cutting its deposit rate by 10 basis points, cutting its refinancing rate by 5 basis points, and increasing the amount of its monthly bond-buying program (quantitative easing). Those moves were deemed to be on the aggressive side of market expectations. The Euro currency initially dropped sharply and to a new six-week low on the news, while the U.S. dollar index initially pushed to solidly higher levels and hit a new high for the week. However, once ECB President Mario Draghi started his press conference after the ECB meeting, he made remarks that were deemed as less-dovish and implied the ECB may not lower interest rates any further. Draghi’s remarks really spooked the market place and the Euro currency and U.S. dollar index swiftly reversed courses—with the Euro pushing sharply higher and the USDX dropping sharply lower. U.S. stock indexes also reversed early modest gains and were holding solid losses in early afternoon trading Thursday. Safe-haven gold benefitted from this extreme turbulence in the marketplace today.
Many traders and investors now reckon that with the ECB Thursday essentially “going all-in” on its stimulative monetary measures, their quiver of arrows is now empty—which is very unsettling. There is also renewed talk in the marketplace of just how effective the monetary policies of the world’s major central banks can be going forward, after so many years of easing policies. Again, this notion plays right into the hands of the gold market bulls.
The huge moves in the currency markets Thursday hint of a possible major shift in trader and investor psychology and may be another signal that the raw commodity sector has seen its bust cycle finally play out and that “hard” assets like gold will in the coming weeks and months continue to gain favor over paper assets like stocks and bonds.
In overnight news, China’s consumer price inflation was a bit hotter than expected, which did put some downside pressure on China’s stock indexes, with the Shanghai index down around 2% on the day. The higher-than-expected inflation data makes it more difficult for China’s central bank to initiate monetary policy easing measures.
New Zealand’s central bank cut its key interest rate by 0.25% Thursday, which was surprising to Asian market watchers.
Technically, April gold futures prices closed nearer the session high and scored a bullish “outside day” up on the daily bar chart today. Prices are in a nearly three-month-old uptrend on the daily bar chart and bulls have the solid overall near-term technical advantage. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at today’s low of 1,237.50. First resistance is seen at last week’s high of $1,280.70 and then at $1,290.00. First support is seen at $1,260.00 and then at $1,250.00. Wyckoff’s Market Rating: 8.0
May silver futures prices closed nearer the session high today and scored a bullish “outside day” up on the daily bar chart. The silver market bulls today gained the slight near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the February high of $16.005 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.61. First resistance is seen at today’s high of $15.665 and then at last week’s high of $15.84. Next support is seen at today’s low of $15.165 and then at $15.00. Wyckoff's Market Rating: 5.5.
May N.Y. copper closed down 135 points at 221.90 cents today. Prices closed nearer the session low. The copper bulls still have the slight overall near-term technical advantage. Prices are still in a seven-week-old uptrend on the daily bar chart. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 235.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the 210.00 cents. First resistance is seen at 225.30 cents and then at Tuesday’s high of 227.65 cents. First support is seen at this week’s low of 220.35 cents and then at 217.05 cents. Wyckoff's Market Rating: 5.5.
By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff
