A freshly produced bar of gold is cleaned at the Boroo gold mine in Boroo, about 150 km north of the Mongolian capital of Ulan Bator in this July 5, 2006 file photo.NIR ELIAS/Reuters
Comex gold futures prices on Friday rallied sharply, hit a fresh five-month high and are now within easy striking distance of $1,700.00 (U.S.). The precious metals markets took flight late Friday morning following the much-anticipated remarks by Federal Reserve Chairman Ben Bernanke at a Fed symposium in Jackson Hole, Wyoming. The Fed chief strongly hinted fresh, unconventional U.S. monetary policy stimulus will be implemented at some point. Indeed, he left the door wide open for a fresh quantitative easing initiative to be unveiled at the September FOMC meeting, or at some point in the not-too-distant future.
The most-active December gold contract on the Comex division of the Nymex settled at $1,687.60 an ounce on Friday, up 1.8 per cent for the day and 0.88 per cent on the week. December silver settled at $31.442 an ounce on Friday, up 2.4 per cent on the week. On the month, December gold rose 4.5 per cent and silver gained 12.3 per cent.
The heightened expectations for fresh quantitative easing (QE3) are music to most commodity market bulls' ears, including gold and silver. It's also stock-market-bullish and U.S. dollar-bearish.
Friday is the last trading day of the month, which makes it an extra important trading day from a technical perspective—and the gold and silver bulls even took full advantage of that by pushing prices to multi-month highs. The gold and silver bulls gained fresh, solid upside technical momentum Friday, to suggest that prices can continue to trend sideways to higher for at least the near term.
In other overnight news, there was more weak economic data coming out of the European Union. The EU unemployment rate rose to 11.3% in July, while inflation checked in at 2.6% in August, on an annualized rate, which was higher than expected. There were also rumors and rumblings in the market place that a German finance official was going to resign, which led to further speculation that European Union monetary policy will soon be eased further. We'll find out more next Thursday when the monthly meeting of the European Central Bank occurs, including a highly awaited press conference from ECB head Mario Draghi. The market place does expect the ECB to announce a fresh monetary stimulus package soon.
The U.S. dollar index was solidly lower Friday. Prices hit a fresh 3.5-month low and closed at a technically bearish weekly and monthly low close. The greenback bears have the near-term technical advantage and gained more downside momentum Friday as a five-week-old downtrend line is in place on the daily bar chart. Meantime, crude oil prices were solidly higher Friday on the QE3 hopes. Oil bulls still have the near-term technical advantage. The precious metals markets will continue to look closely at how these two key "outside markets" trade on a daily basis.