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Gold Weakens in Wake of Hawkish FOMC Minutes

This article is more than 9 years old.

(Kitco News) - Gold prices sold off moderately in the aftermath of FOMC minutes that revealed Fed officials believe the U.S. labor situation is moving closer to normal, and with other clues hinting the Fed could raise interest rates sooner than many expected. December Comex gold was last down $6.50 at $1,290.20 an ounce. Spot gold was last quoted down $5.90 at $1,289.75. December Comex silver last traded up $0.009 at $19.485 an ounce.

The FOMC minutes report was the economic highlight of the day for the market place. The Fed officials’ wording that the U.S. labor situation continues to improve fell into the camp of monetary policy hawks, as it hinted the U.S. central bank could move to raise interest rates sooner than many expected.

Now, focus turns to later this week and the annual Kansas City Federal Reserve meeting in Jackson Hole, Wyoming, that begins on Thursday. The confab of world central bankers has in the past yielded important U.S. monetary policy speeches and clues to the direction of monetary policy. Fed Chair Janet Yellen and ECB President Mario Draghi are scheduled to speak on Friday in Jackson Hole.

In overnight news, the German government auctioned its two-year note (the Schatz) at a zero percent yield, amid strong investor demand. This underscores the keener risk aversion still in the market place, especially in the European Union, where slow to negative economic growth and very low inflation are serious concerns. It was also reported that German producer prices fell 0.1% on the month and were down 0.8% on the year in July.

A feature in the market place recently has been a stronger U.S. dollar against the other major currencies of the world. The U.S. dollar index, which is a basket of six major currencies weighted against the greenback, hit an 11-month high overnight. There has been increased safe-haven demand for the dollar amid the recent heightened geopolitical tensions. The stronger dollar is a bearish underlying factor for the raw commodity sector, including the precious metals.

The London P.M. gold fix was $1,295.00 versus the previous A.M. fixing of $1,294.50.

Technically, December gold futures prices closed nearer the session low and hit a two-week low Wednesday. Gold bulls and bears are still on a level overall near-term technical playing field but the bulls are fading. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the August high of $1,324.30. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the August low of $1,281.00. First resistance is seen at $1,300.00 and then at this week’s high of $1,304.90. First support is seen at $1,289.00 and then at $1,281.00. Wyckoff’s Market Rating: 5.0

December silver futures prices closed nearer the session low on tepid short covering in a bear market. Prices Tuesday hit a two-month low. Silver prices are in a six-week-old downtrend on the daily bar chart. The bears have the firm overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $19.00. First resistance is seen at Wednesday’s high of $19.65 and then at this week’s high of $19.765. Next support is seen at this week’s low of $19.425 and then at $19.25. Wyckoff's Market Rating: 2.5.

December N.Y. copper closed up 740 points at 319.30 cents Wednesday. Prices closed nearer the session high on heavy short covering from recent selling pressure. Bulls today regained some upside near-term technical momentum. Copper bears still have the slight overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 325.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the August low of 310.20 cents. First resistance is seen at 320.00 cents and then at 321.00 cents. First support is seen at 317.50 cents and then at 315.00 cents. Wyckoff's Market Rating: 4.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

Follow me on Twitter @jimwyckoff