Metals Roundup: Gold Rallies Sharply on Apparent U.S. Fiscal Cliff Deal, Which Boosts Risk Appetite

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Metals Roundup: Gold Rallies Sharply on Apparent U.S. Fiscal Cliff Deal, Which Boosts Risk Appetite

Monday December 31, 2012

Comex gold futures prices rallied sharply in afternoon trading Monday, on news the Obama administration and U.S. lawmakers have apparently made good progress and are near a deal on the U.S. “fiscal cliff” matter that has been dominating the business news headlines for several weeks. Short covering, bargain hunting and even some fresh safe-haven demand early in the day were featured in the gold market. February gold last traded up $20.30 an ounce at $1,676.20. Spot gold was last quoted up $20.00 at $1,676.75.  March Comex silver last traded up $0.355 at $30.33 an ounce.
(Note: I want to wish all my readers a healthy and prosperous new year. It is a privilege for me to serve you, my valued reader, and I hope to continue to provide you with my observations and analysis for many years to come.—Jim)
Markets were quieter overnight and for most of the day, on this last trading day of the year, and ahead of the New Year’s Day holiday on Tuesday. Most U.S. markets closed early Monday. Then in early afternoon trading newswires reported that President Obama was going to make a statement–most likely on the fiscal cliff situation. Indeed, Obama did say progress had been made and at least a partial deal was likely to be forged soon. Gold rallied sharply along with some other raw commodity markets and the U.S. stock market. Traders took on a keener “risk-on” mentality in the market place, in the wake of the Obama statement. U.S. lawmakers need to reach a deal by January 3 to avoid a series of tax increases and spending cuts that automatically go into effect.
In other news, the CME Group announced Friday it will decrease gold futures margins by 11% beginning on January 2. That is a bullish underlying factor for the gold market.
Gold will end the near 2012 with an overall yearly gain of around 7%, which marks the 12th consecutive year the yellow metal has posted yearly gains.
In other overnight news, there was some better Chinese manufacturing data released. The HSBC purchasing managers index rose to 51.5 in December, which is a 19-month high and was up from 50.5 seen in November. That was also a bit of fresh bullish news for the raw commodity markets, including the precious metals.
The U.S. dollar index was firmer Monday on some short covering in a bear market. The dollar index bears still have the overall near-term technical advantage. Meantime, Nymex crude oil futures prices were modestly higher Monday and hit a fresh nine-week high. The crude oil bulls have upside near-term technical momentum. These are two key “outside markets” that will continue to impact the precious metals markets on a daily basis.
Technically, February gold futures prices closed nearer the session high and hit a fresh two-week high Monday. Prices climbed back above the key 200-day moving average Monday, which is a bullish clue. However, the gold bears still have the overall near-term technical advantage. A 2.5-month-old downtrend is still in place on the daily bar chart. The gold bulls’ next upside price breakout objective is to produce a close above psychological resistance at $1,700.00. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at the December low of $1,636.00. First resistance is seen at Monday’s high of $1,681.00 and then at 1,690.00. First support is seen at 1,665.00 and then at Monday’s low of $1,655.90. Wyckoff’s Market Rating: 4.0
March silver futures prices closed nearer the session high Monday. The silver bears still have the overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $31.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $29.00. First resistance is seen at $30.53 and then at $30.79. Next support is seen at $30.00 and then at last week’s low of $29.635. Wyckoff’s Market Rating: 3.5.
March N.Y. copper closed up 545 points at 364.45 cents Monday. Prices closed nearer the session high and scored a bullish “outside day” up on the daily bar chart today. Copper bulls have regained the slight near-term technical advantage. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at the December high of 372.10 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the December low of 352.30 cents. First resistance is seen at Monday’s high of 365.50 cents and then at 367.50 cents. First support is seen at 362.25 cents and then at 360.00 cents. Wyckoff’s Market Rating: 5.5.
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