Gold Prices Power To 9-Week High, More Upside Likely

(Kitco News) - Gold bulls today got a quadruple dose of bullish fuel that boosted prices to nine-week highs and above the recent sideways trading range. Today’s surprising gains in gold set the table for sideways-to-higher price action at least into the end of the year.December gold futures were last up $32.70 an ounce at $1,226.20. December Comex silver was last up $0.269 at $14.60 an ounce.

Here are the elements that today powered the gold market sharply higher and could continue to provide support for at least the near term:

1. Safe-haven demand for the yellow metal was featured amid steep sell-offs in world stock markets that have spooked traders and investors around the globe.

2. A very tame U.S. inflation report also boosted the metals markets. The U.S. consumer price index report for September came in at up a scant 0.1% from August, while expectations were for a 0.2% rise. Gold prices pushed to what were then their daily highs on the data, which suggests U.S. inflation is not at all problematic and also hints the Federal Reserve could back off the accelerator on raising U.S. interest rates.

3. A lower U.S. dollar index today also worked in favor of the precious metals bulls. The tame CPI report, the shaky U.S. stock market and ideas the Fed may back off on raising interest rates pressured the greenback.

4. Technical buying in gold kicked in big-time today as buy stop orders were triggered in the futures market after key chart resistance levels were penetrated on the upside. Also, today’s price action produced a big and bullish upside “breakout” from a sideways trading range on the daily bar chart, to now suggest a price uptrend can be sustained.

Global stock markets were hammered lower overnight, following the U.S. stock-market pounding that took place Wednesday. China’s stock market dropped over 5% and hit a four-year low overnight. U.S. stock indexes were mixed as of this writing Thursday afternoon after hitting three-month lows earlier today. You were warned in this report on Monday that the U.S. stock indexes were showing early clues of topping out. Price action Wednesday and today now more strongly suggest the U.S. stock indexes have put in near-term tops, if not major tops. Such is a bullish development for the competing hard assets like the metals.

The sharp decline in the Chinese yuan against the U.S. dollar is in focus again late this week. The depreciating yuan makes China’s exports cheaper on the world market, but it also invites capital outflows from China. The U.S. has warned China about using its currency to gain world trade advantages.

The keen risk aversion now in the marketplace is also due in part to rising world government bond yields, with the implications being rising inflation along with the negative impact on global stock markets. U.S. Treasury prices are actually higher today, on safe-haven demand.

Discussion among traders and investors now is whether the Fed will take its foot off the gas on raising U.S. interest rates. President Trump on Wednesday, following the U.S. stock market sell-off, said “the Fed is making a mistake” and “I think the Fed has gone crazy.” Such rhetoric from the U.S. president will surely garner the attention of the Fed’s FOMC members who set interest rate policy.

The other key outside market today finds November Nymex crude oil prices sharply lower and trading below $72.00 a barrel on concerns about slowing world economic growth that would mean less demand for oil.

Technically, gold prices today saw a bullish upside “breakout” from the sideways trading range on the daily bar chart. This suggests a price uptrend can now be sustained, probably at least into the end of this year. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,250.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at this week’s low of $1,186.00. First resistance is seen at $1,230.00 and then at $1,240.00. First support is seen at $1,218.00 and then at $1,210.00. Wyckoff's Market Rating: 5.0

The silver bears still have the overall near-term technical advantage. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at the October high of $14.95 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the September low of $13.965. First resistance is seen at today’s high of $14.65 and then at $14.75. Next support is seen at this week’s low of $14.255 and then at $14.195. Wyckoff's Market Rating: 3.0.

December N.Y. copper closed up 215 points at 280.25 cents today. Prices closed nearer the session high today after hitting a three-week low early on. The copper bears have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the 290.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the August low of 257.45 cents. First resistance is seen at this week’s high of 282.00 cents and then at 285.00 cents. First support is seen at today’s low of 277.20 cents and then at 275.00 cents. Wyckoff's Market Rating: 3.5.