Gold Firmer on Short Covering, Bargain Hunting, Weaker U.S. Dollar Index

(Kitco News) – Gold futures prices are trading modestly higher in early U.S. trading Thursday. A lower U.S. dollar index has prompted some short covering and bargain hunting in both gold and silver markets. Traders are awaiting some key economic data due out the next couple days for price direction. April Comex gold last traded up $6.00 at $1,580.90 an ounce. Spot gold was last quoted down $2.40 at $1,582.50.  May Comex silver last traded up $0.087 at $28.89 an ounce.

The Euro currency and European stock markets were boosted Thursday by a successful Spanish bond auction that saw good investor demand and lower yields. The European Central Bank held its monthly meeting Thursday and announced no major changes to its monetary policy. Traders will closely scrutinize ECB chief Mario Draghi’s remarks at his press conference following the meeting. The Bank of England’s monthly meeting Thursday also saw no change in interest rates or monetary policy, as expected. The Bank of Japan also held a policy meeting Thursday that saw no major changes.

The most important U.S. economic report of the month, the employment situation report for February, is due out Friday morning. The key non-farm payroll number is expected to come in at up 157,000, while the unemployment rate is forecast at 7.8%. Look for more active trading in the gold and silver markets in the immediate aftermath of Friday morning’s jobs report. China issues its monthly trade data on Friday, and that data, too, will be closely monitored.

Reports this week say that investor demand for physical gold has increased recently at the lower price levels.

The U.S. dollar index is lower Thursday morning, on profit taking from recent gains that pushed the index to a six-month high this week. The U.S. dollar bulls still have technical strength to suggest the dollar index can continue to trend higher in the near term. That’s a bearish underlying factor for gold and silver. Meantime, Nymex crude oil futures prices are firmer early Thursday. The crude oil bears still have the near-term technical advantage as prices hover near a nine-week low, and that’s also a negative for gold and silver prices.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job cuts report, the U.S. trade report, and ICSC chain store sales trends.

The London A.M. gold fixing is $1,580.50 versus the previous London P.M. fixing of $1,574.00.

Technically, April gold futures prices have been trading sideways on the daily chart this week, but are still in a six-week-old downtrend. Bears still have the overall near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,619.70. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at the February low of $1,554.30. First resistance is seen at this week’s high of $1,585.80 and then at $1,590.00. First support is seen at $1,575.00 and then at last week’s low of $1,564.00.

May silver futures bears have the near-term technical advantage. Silver prices are in a six-week-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $29.495 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $27.925. First resistance is seen at this week’s high of $29.14 and then at $29.495. Next support is seen at this week’s low of $28.43 and then at $28.315.

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

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