The precious metals got a boost today from an unlikely source, the minutes of the last FOMC meeting. Normally the the FOMC minutes do not reveal much of a hint as to what they are thinking because they like to keep their intentions close to the vest, but today they showed that the consensus of it’s members is pointing towards further quantitative easing (QE-3) of monetary policy. The minutes were leaning towards more QE “if”, and its a big “if”, the U.S. economy does not show signs of improvement soon. Gold wasted no time and took off after the announcement, rising $15.10, or.92% to $1,658. The dollar, on the other hand, did not like the news and sold off as the following chart, courtesy of bigcharts.com, shows.
The XAU greeted the news with a sharp jump to 167.98, up 3.62, or 2.20%. It looks like the summer doldrums may be coming to an end as these sharp moves demonstrate.
The markets were obviously surprised by the contents of the meeting minutes and rightly so because QE-3 had been rumored so many times only to be shot down in the minutes. People will now be looking to see what Fed Chairman Ben Bernanke says at the Fed’s annual Jackson Hole Federal Reserve conference next week. If QE-3 is not announced then, the attention will shift to the mid-September FOMC meeting. It is pretty clear that QE-3 is coming. It is only the “when” and the “in what form” that is under debate.
In Euro news, a two-year German note auction brought no yield, which is a huge indicator that Europeans are seeking safe-haven assets. This news is also very supportive of gold and it could help prop up the dollar in the short term. European Central Bank President Draghi should give some indication of which direction he is going to take during The European Central Bank’s September meeting.
Gold And Silver Price Support And Resistance
The next big resistance for gold on the upside is $1,675 while the major downside support is at the August low of $1,586.30. Minor resistance is at $1,660.00, with the downside support at $1,633.30 and followed by $1,625.00.
Silver futures hit a new 2 &1/2 month high 0f $29.84, up .51 cents for the day. It looks like silver has definitely broken out of its summer trading range to the upside. The resistance to the upside is set at $29.91, while the support to the downside is at today’s low of $29.17 followed by the $29.00 mark.
One final news item to note in this update. The PIMCO Investment Fund is adding to its gold holdings because it is predicting an increase in inflation over the next couple of years. What a “shocker” that statement was, as I place my tongue firmly in cheek.
That’s it for this Wednesday. the 22nd of August. Fasten your seat belts because the summer doldrums appear to be over and the ride will be getting a little bumpier from here to the end of the year!
Till next time, good luck and good trading!