Gold Gains On Dovish Central Bankers, U.S. Stock Market Drop

(Kitco News) - Gold prices ended the U.S. day session with moderate gains Thursday, boosted by the recent releases of minutes from two major central banks (Federal Reserve and European Central Bank) that suggest their monetary policies will remain very accommodative. A big sell-off in the U.S. stock market today also supported the safe-haven metal. December Comex gold was last up $8.60 an ounce at $1,291.50. September Comex silver was last up $0.085 at $17.02 an ounce.

The minutes from the July 20 meeting of the European Central Bank, released Thursday, showed the ECB, like the Federal Reserve, is very concerned about low inflation levels presently gripping the world’s major economies. The ECB also is worried about the recent appreciation of the Euro currency. The Euro sold off and hit a three-week low after the ECB minutes’ release. Gold prices moved to their daily highs after the ECB report, which was released just before the U.S. open Thursday.

Wednesday afternoon’s FOMC minutes showed FOMC members split of the prospects of further Federal Reserve interest rate increases in the coming months. Very low inflation readings from major economies around the world, including the U.S., are preventing the Fed from raising interest rates as soon as it would like.

Raw commodity markets, including the precious metals, have benefitted in recent years from very low interest rates and from central banks pumping cash into their financial systems.

While world stock markets were mixed Thursday, the U.S. stock market posted large declines on some disappointing corporate earnings reports. The gold and silver market bulls saw some increased demand on the sell-off in the U.S. stock market. Remember that the historically harsh months of September and October lie just ahead for the equities. Gold bulls would enjoy such a scenario.

In overnight news, the Euro zone consumer price index for July came in at down 0.5% from June and was up 1.3%, year-on-year. This is yet another very low inflation reading that falls into the camp of the European Central Bank monetary policy doves.

For the key “outside markets” early Thursday, the U.S. dollar index was modestly higher as the greenback bulls are having a good week. A bullish weekly high close in the USDX on Friday would begin to suggest a market bottom is in place. Meantime, Nymex crude oil futures were slightly higher on some short covering after hitting another three-week low overnight. Rising U.S. shale production is weighing on the oil market late this week. A bearish weekly low close in Nymex crude oil futures on Friday would hint that the uptrend on the daily bar chart has ended.

Technically, December gold futures bulls have the overall near-term technical advantage. A five-week-old uptrend is still in place on the daily bar chart. Bulls’ next upside technical objective is pushing prices above chart resistance at $1,300.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at last week’s low of $1,257.10. First resistance is seen at the August high of $1,298.10 and then at $1,300.00. First support is seen at today’s low of $1,286.40 and then at $1,280.00. Wyckoff’s Market Rating: 6.5

September silver bulls have the overall near-term technical advantage and have regained upside momentum late this week. Silver prices are in a five-week-old uptrend on the daily bar chart. The next upside price breakout objective is closing futures prices above solid technical resistance at $18.00 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 the August high of $17.24 and then at $17.50. Next support is seen at $16.75 and then at this week’s low of $16.56. Wyckoff's Market Rating: 6.0.