Comex gold futures ended the U.S. day session sharply higher and
near the daily high Thursday, posting the largest daily advance in many
weeks. Traders and investors stepped in to "buy the dip" in gold
prices by doing some heavy short covering and bargain hunting. For the
first time in a while some significant safe-haven investment demand
also cropped up in gold. The gold market was also oversold,
technically, and due for an upside corrective bounce, which it saw
Thursday. June gold last traded up $37.00 at $1,573.60 an ounce. Spot
gold was last quoted up $33.60 an ounce at $1,574.50. July Comex
silver last traded up $0.814 at $28.01 an ounce.
The market place was seeing just a bit of a
pick-up in investor risk appetite early Thursday morning, following
Wednesday afternoon’s release of the minutes of the latest meeting of
the Federal Open Market Committee, which hinted that further
quantitative easing of U.S. monetary policy is not off the table. Then
the Philadelphia Federal Reserve business survey was released and it
was weaker than expected. That dented gains in the dollar index and
U.S. stock market, rallied the U.S. Treasury prices, and was one
impetus for traders to do some short covering and fresh buying in the
gold market.
It’s important to note that Thursday’s gains in
gold came amid somewhat of an overall “risk-off” day in the general
market place, following the Philadelphia Fed survey. The big gains in
gold do suggest a portion of the yellow metal’s gains were related to
safe-haven investment demand.
Wednesday afternoon’s FOMC minutes that hinted
further quantitative easing of U.S. monetary policy is possible if the
economy were to continue its lethargic ways is an underlying bullish
factor for the raw commodity markets, including the precious metals.
Thursday’s weak U.S. economic data further stoked notions “QE3” is not
at all off the table. Most traders and investors reckon a QE3 situation
would be inflationary down the road, which is
commodity-market-bullish. However, many reckoned the monetary stimulus
seen by the major central banks of the world during the past 3.5 years
would have already produced inflationary price pressures.
For the gold market bulls, they needed to see a
day of solid, corrective upside price action. Prices were nearing the
key technical level of $1,500.00 an ounce. A move below that major
psychological support level would begin to inflict longer-term chart
damage and would call into question the 11-year-old price uptrend that
remains in place on the longer-term charts. Gold prices around this
week’s low also mark a 20% decline from the all-time highs scored last
year. Many market watchers determine a bear market to be in place when a
market price has backed off by 20%.
The European Union debt and financial crisis is
still on the front burner of the market place. The Fitch ratings agency
Thursday further downgraded Greece’s debt rating, which was not at all
surprising. After Tuesday’s failed efforts by Greek politicians to
form a coalition government, fresh Greek elections are now scheduled for
mid-June. Concerns regarding Greece leaving the Euro zone are high, as
the Greeks’ commitment to financial austerity is highly questionable.
Spanish and Italian bond yields are above 6%, which is stressing the EU
financial system.
The U.S. dollar index traded near steady
Thursday after hitting another fresh four-month high overnight. The
greenback has benefited recently on fresh safe-haven demand mainly due
to the EU situation. The dollar index bulls have good upside near-term
technical momentum. Meantime, crude oil futures prices were slightly
lower Thursday after prices Wednesday hit a fresh 6.5-month low of
$91.81 a barrel. Crude oil remains in a bearish fundamental and
technical posture. If crude oil continues to trend lower and the dollar
index continues to trend higher, sustainable near-term price uptrends
in gold and silver could be difficult to achieve—unless more solid
safe-haven demand for gold surfaces.
Source: http://www.kitco.com/reports/KitcoNews20120517JW_pm.html
No comments:
Post a Comment