Gold saw higher than expected physical demand from China right out of the gate overnight, and handily broke the resistance level of $1,279. It stayed strong in Europe, between $1,280 and $1,285, and blipped upwards at the New York open to hit the best level so far in 2014, a three-month high of $1,286.
The joy was short-lived, as the prepared remarks of new Fed chairman Janet Yellen were released to the press before her appearance today in front of Congress. This revealed that she will be closely toeing the party line, at least for now. Her remarks saved a swooning dollar, with the DXY index recovering to unchanged, and sent gold down under the $1,280 mark briefly, taking the other precious metals lower with it.
Gold only spent a few minutes under $1,280, which might signify that the former resistance level of $1,279 is now support. We were encouraged that the market didn't try to push that level yesterday, and built strength at $1,275. That made a run today on $1,280 more likely to succeed. That close yesterday at $1,275 was above the 100 DMA for gold, which is a strong bullish signal.
Wall St. opened in the green this morning, boosted by Yellen's remarks. While she hinted that the current schedule of tapering the Fed's bond-buying program would remain intact, she reiterated that the benchmark interest rate would stay at near-zero.
In Europe, stocks hit a two-week high on good earnings reports from BMW and l'Oreal, among others. Analysts raised their forecast for auto sales in Western Europe, which should give a little bit of support for the PGMs.
In Asia, the Nikkei hit a one-week high, up 1.77%, on light volume and a weaker yen. The Hang Seng was up 1.78% on short-covering. The Shanghai index also rose, .86%.
At 10am in New York, precious metals are all rebounding nicely after the Yellen-induced dip, even against a slightly stronger dollar and advancing stock market. The yield on the 10-year Treasury has increased to 2.72%.
Stronger than expected physical demand in China is likely due to the prominent almost-default of a high-yield "trust product," that was rescued by mysterious unknown buyers (aka the PBOC.) Investors are taking the hint and stocking up on gold immediately after the Chinese New Year, a time where demand is usually soft. Western investors are moving into the gold camp as well, as a safety precaution against the meltdown of Turkey, Brazil, Hungary and Ukraine.
Conditions as they stand should allow gold to continue small steps upwards, firming up before the push on the next resistance level. Small, steady gains are much preferable to a spike upwards, which would bring a knee-jerk reaction from profit-takers.