Gold futures prices are moderately lower in early U.S. trading Wednesday, as the market sees a downside correction and chart consolidation following the strong gains posted on Tuesday. The gold market bulls are now working to repair the recent near-term technical damage, but have more heavy lifting to do.
Traders and investors are still digesting Tuesday's testimony on the U.S. economy to the Senate by Federal Reserve Chairman Ben Bernanke. As expected, the central bank chief said U.S. monetary policy will remain very accommodative for the foreseeable future. He also said there is no U.S. equity bubble. Bernanke's remarks boosted the U.S. stock market as well as gold and silver markets Tuesday. Bernanke speaks to a U.S. House of Representatives committee Wednesday.
The European Union and its sovereign debt problems are still simmering on the front burner of the market place. The Italian elections failed to show a clear winner as voters ostensibly rebuked present government austerity measures. Some modestly upbeat EU data on consumer and business confidence was released Wednesday as the Economic Sentiment Indicator rose to 91.1 in February versus 89.5 in January, and reaching the highest level since last May. That news helped to modestly lift the European stock markets and the Euro currency Wednesday. There is an Italian government debt auction Wednesday that will be very closely scrutinized by the market place to gauge European investor risk appetite. The EU debt crisis flaring up again has been a supportive element for safe-haven assets such as gold.
The U.S. government's likely inability to agree on a taxing and spending plan by the March 1 sequestration deadline is added to a nervous and uncertain atmosphere in the world market place this week. That's also a mildly supportive factor for the safe-haven investment assets this week.
The U.S. Dollar Index is lower early Wednesday on a profit-taking pullback after prices Tuesday hit a six-month high. The U.S. dollar bulls have upside technical momentum recently to suggest the dollar index has put in a market bottom. Meantime, Nymex crude oil futures prices are slightly higher early Wednesday. Prices Tuesday hit a two-month low. The crude oil bears have downside near-term technical momentum. These two markets are still important "outside markets" that have a daily influence on the prices of precious metals.
Technically, April gold futures are seeing a good corrective bounce after last week's strong downside price pressure. Gold is still in a six-week-old downtrend on the daily bar chart. The gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at the January low of $1,627.90. Bears' next near-term downside breakout price objective is closing prices below solid technical support at last week's low of $1,554.30. First resistance is seen at the overnight high of $1,614.40 and then at Tuesday's high of $1,619.70. First support is seen at $1,600.00 and then at $1,590.00.