Gold Rallies On Dovish FOMC Statement

(Kitco News) - Gold and silver prices are solidly up and in early-afternoon U.S. trading Wednesday, and have rallied to daily highs following the Federal Reserve’s FOMC statement that was deemed dovish. Gold notched an eight-month high, while silver pushed to six-month highs. February gold futures were last up $7.30 an ounce at $1,316.10. March Comex silver was last up $0.181 at $16.02 an ounce.

The economic highlight at mid-week is the Federal Reserve’s Open Market Committee (FOMC) meeting that began on Tuesday morning and ended this afternoon with a statement on monetary policy. The statement contained no monetary policy changes but the FOMC members said they will now be patient on future Fed rate hikes due to muted inflationary pressures and some concerns about global economic growth. The FOMC statement also suggested the Fed will not be in such a hurry to reduce its balance sheet of U.S. securities. While no change in monetary policy was expected, the FOMC statement was deemed fully dovish on U.S. monetary policy. Now traders are awaiting the press conference from Fed Chairman Jerome Powell, set to begin shortly. Powell is getting a reputation for putting his foot in his mouth while making comments to the press or at speeches.

The U.S. dollar index sold off on the dovish FOMC statement, while the U.S. stock market rallied solidly to its daily high.

Today’s U.S. ADP national employment report showed a rise of 213,000 jobs in January. That was well above the average trade guess of up 183,000. Gold and silver prices did not see any significant price moves after the report. The ADP report is a precursor to Friday morning’s more important Employment Situation Report issued by the Labor Department.

The U.K. parliament on Tuesday evening backed the “Plan B” Brexit initiative from Prime Minister Theresa May, albeit not whole-heartedly. The Parliament had rejected May’s initial Brexit plan. The marketplace was not significantly impacted by that news.

U.S. and China high-level trade officials are meeting in Washington, D.C, on Wednesday and Thursday. There is no consensus at all on any progress that may or may not be made at this week’s talks. The U.S. government this week filed new charges against the high-tech company from China, Huawei. President Trump also plans to speak to the Chinese delegation that is in Washington this week. Metals markets would likely react to any significant news coming out of those meetings.

Technically, the gold bulls have the firm overall near-term technical advantage and have gained power this week. Prices are in a 2.5-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,330.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at last week’s low of $1,275.30. First resistance is seen at today’s high of $1,317.50 and then at $1,320.00. First support is seen at today’s low of $1,308.10 and then at $1,300.00. Wyckoff's Market Rating: 7.0

March silver futures bulls have the near-term technical advantage and have momentum on their side. A 2.5-month-old uptrend on the daily bar chart has been restarted. 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 the January low of $15.195. First resistance is seen at $16.25 and then at $16.50. Next support is seen at $15.725 and then at this week’s low of $15.61. Wyckoff's Market Rating: 6.5.