Gold Gains, Hits 6-Week High, On Dovish Fed

(Kitco News) - Gold prices were ending the U.S. day session with decent gains and scored a six-week high Thursday, in the wake of a dovish Federal Reserve statement Wednesday that pushed the U.S. dollar index to a 13-month low. Gold prices did finish down from the daily high as the greenback bounced up from its session low. August Comex gold was last up $9.30 an ounce at $1,258.60. September Comex silver was last up $0.136 at $16.595 an ounce.

Wednesday afternoon’s Federal Reserve’s Open Market Committee meeting (FOMC) statement did not change U.S. interest rates or monetary policy. No changes were expected. The statement did say the Fed is looking to soon change its policy on its big balance sheet of U.S. securities. That suggested the Fed wants to shrink it sooner rather than later. However, the marketplace did not perceive the Fed statement to be leaning toward the hawkish side of U.S. monetary policy mainly because many Fed watchers feel the Fed won’t raise interest rates until December, if even then. Fed watchers also think the Fed is starting to worry more about deflationary price pressures creeping back into world economies. Read all of the above as a Fed that will be very careful about raising interest rates too quickly. The very easy-money Fed of the past several years has been a bullish element for the raw commodity sector, including the precious metals.

Reports today said India is moving to make “paper” gold (such as sovereign gold bonds) more attractive to its domestic investors, in order to reduce demand for actual gold bullion.

The marketplace is now looking ahead to the U.S. second-quarter advance gross domestic product (GDP) report, due out on Friday morning. Forecasts are calling for that number to come in at up 2.7%, year-on-year versus the first-quarter reading of up 1.4%. A stronger-than-expected reading on GDP would likely be bearish for the precious metals because it may allow the Fed to raise interest rates sooner.

The U.S. dollar index sold off following the FOMC statement Wednesday afternoon and then saw follow-through selling pressure to hit a 13-month low early Thursday. However, the index did rebound during the session on short covering and a technical chart consolidation. The Euro currency rose to a nearly two-year high Thursday. The Euro has been in a strong price uptrend since early April. The present postures of these two major currencies are bullish for the precious metals markets.

The other “outside market” on Thursday saw Nymex crude oil futures firmer and hitting a six-week high. Crude prices are in a five-week-old uptrend and bulls are eyeing pushing the market above the key $50.00 level soon. Rising crude oil prices are bullish for the raw commodity sector, including the precious metals, because crude is arguably the leader of the raw commodity sector.

Technically, August gold futures prices closed near mid-range after hitting a six-week high early on. The gold bulls have the overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,280.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,240.00. First resistance is seen at today’s high of $1,265.00 and then at $1,270.00. First support is seen at today’s low of $1,253.90 and then at $1,250.00. Wyckoff's Market Rating: 6.0

September silver futures prices closed nearer the session low after hitting a four-week high early on. While the silver bears still have the overall near-term technical advantage recent price action suggests a near-term market bottom is in place and that prices can trade at least sideways, if not sideways to higher. 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 today’s high of $16.81 and then at $16.915. Next support is seen at $16.50 and then at this week’s low of $16.225. Wyckoff's Market Rating: 4.0.

September N.Y. copper closed up 65 points at 287.85 cents today. Prices closed near mid-range today closed at a two-year high close. The copper bulls have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 300.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 270.00 cents. First resistance is seen at this week’s high of 290.55 cents and then at 292.50 cents. First support is seen at today’s low of 286.20 cents and then at 283.20 cents. Wyckoff's Market Rating: 8.0.