Gold News

Black Friday Sees Gold Hit New 6-Year Discount, 'Only 1 in 10' Signs of Capitulation

GOLD PRICES sank to new 6-year lows against the Dollar in London trade on 'Black Friday', dropping 1.1% inside 20 minutes as Western equities rallied following the sharpest drop in China's stock market since this summer's crash.
 
With China's financial regulator now investigating the country's top 3 brokerages, the SSE Composite Index lost 5.5% for the day, after Haitong Securities joined Citic and Guosen in saying it is under formal investigation for breaching unspecified rules.
 
New data today showed industrial profits in China falling almost 5% last month from October 2014 – the fifth decline in a row as "surplus inventory [remains] the ghost haunting profits," according to a note from economists at Minsheng Securities.
 
Mining giant Anglo American (LON:AAL) then fell to new record lows in London, down 6.7% at one point, as base metal prices fell further with crude oil.
 
Falling through last week's low at $1065 to hit $1053 per ounce, Dollar gold prices have now lost more than 45% from the all-time record of September 2011, hitting the lowest level since January 2010.
Chart of gold price in US Dollars hitting new 6-year lows
Euro gold prices also fell over 1%, dropping through €1000 per ounce to erase the last of 2015's strong earlier gains.
 
Silver also fell but stayed firmer again, holding 10 cents per ounce above Monday's new 6-year lows and trading above $14.00.
 
Investors in precious-metals backed trust funds last week pulled out money at the fastest pace in 4 months, analysis from Bank of America Merrill Lynch says.
 
Out of 10 signs of capitulation investors might look for in the gold market, says the latest Atlas Pulse report from ex-HSBC wealth manager Charlie Morris, only the positioning of speculative traders in Comex futures and options currently looks "bullish".
 
"[The] relationship between gold and commodities is the most bearish of all ten," he goes on. Because with the broad commodity complex implying "fair value" in gold at $675 per ounce, this ratio "won’t be satisfied until gold touches that 2008 low."
 
"We [were] keeping an eye on the US Dollar as a possible catalyst," said a technical gold price analysis Wednesday from bullion bank Scotia Mocatta's New York team, written before yesterday's Thanksgiving holiday.
 
A rise in the Dollar "would put downside pressure on gold, with a break of $1066 yielding initial $1045, which is the 2010 low."
 
Looking at the gold price's 2015 downtrend, "[a] move towards lower [channel] limit at $1045 and even $1030 – the highs made in 2008 – can't be ruled out," said a techncial analysis last week from French investment bank and London bullion market maker Societe Generale.
 
In contrast to Friday's China data, UK economic growth during Q3 was confirmed at 2.3% annualized by the Office for National Statistics' new GDP estimate.
 
Growth in business investment was more than doubled from the ONS' previous figure, up to 6.6% per year – the best in 2015.
 
But the UK's trade deficit with the rest of the world widened to a series record of 1.5% of GDP – the highest number since at least 1997.
 
Gold priced in Sterling today flirted with last week's 3-month low at £700 per ounce.
 
Having previously refused to join the US-inspired 'Black Friday' retail discounting, UK supermarket chain Asda today cut the price of unleaded petrol below £1 per litre – a price last seen during the financial and commodities crash of 2009.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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