Gold goes higher with Fed rate hike.

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Gold Holds On To Early Gains Following As-Expected Fed Rate Hike
Wednesday December 16, 2015 14:26

(Kitco News) - Gold prices were trading higher in afternoon dealings Wednesday and holding on to  early gains in the aftermath of the first interest rate increase from the U.S. Federal Reserve since 2006. Short covering and position evening in the futures markets, and bargain hunting in the cash markets, were featured in gold and silver ahead of this afternoon's FOMC statement. February gold was last up $10.70 an ounce at $1,072.30. March silver futures were last up $0.39 an ounce at $14.16.

Many traders reckoned the gold market would exhibit a "sell the rumor, buy the fact" scenario regarding the Fed rate increase this afternoon, and wanted to get a jump on that scenario. Thus, the gains seen in gold prior to the Fed rate hike. Silver prices followed gold’s lead today.

The Federal Reserve’s Open Market Committee (FOMC) statement this afternoon was deemed to be in the dovish camp. However, the U.S. dollar index did rally on the FOMC news. What will now be closely watched is Fed Chair Janet Yellen’s press conference after the meeting that could provide more clues on the pace of future interest rate increases.

In overnight news, the Euro zone consumer price index for November came in at down 0.1%, month-on-month and up 0.2% year-on-year. The report suggests deflation remains a serious concern in the European Union and that the European Central Bank is likely to embark upon more monetary policy stimulus measures sooner rather than later. The ECB wants to see an annual inflation rate of 2.0%.

The Euro zone December composite purchasing managers index (PMI) came in at 54.0 in December versus 54.2 in November. A reading of 54.2 was expected for December. However, the manufacturing PMI came in at 53.1 in December compared to 52.8 in November. The manufacturing number was expected to show a reading of 52.8 in December.

Technically, February gold futures prices were near mid-range in afternoon trading. Gold bears still have the solid overall near-term technical advantage. There are still no early clues of a market bottom being close at hand. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the December high of $1,088.30. Bears' next near-term downside price breakout objective is pushing prices below solid longer-term technical support at the contract low of 1,045.40. First resistance is seen at today’s high of $1,077.90 and then at $1,085.00. First support is seen at today’s low of $1,060.20 and then at this week’s low of $1,057.40.

 

Encouraging for the Gold Bulls, price remains higher, stable.