Gold Bullion "Seeking Base, Nears $1180 Double-Bottom" as Silver Bears Outweigh Physical Bulls at 4-Year Lows
Monday, 9/22/2014 14:10
GOLD BULLION prices sank and then rallied to unchanged in busy Asian and London trade Monday, recovering 0.6% from new 2014 lows as world stock markets fell and commodity prices sank.
Iron ore joined soybeans and corn at new 4-year lows as Europe's Brent crude oil contract fell through $98 per barrel.
Major government bond prices rose, nudging longer-term interest rates down ahead of Tuesday's latest Chinese manufacturing data.
Silver prices followed and extended the drop and rally in gold bullion, recovering an earlier 2.5% plunge to trade back at $17.80 per ounce – a fresh 4-year low when hit at the close of last week's trade.
"Gold continues to search for a base, and the $1180 double bottom gets ever closer," says Mitsubishi's analyst Jonathan Butler, pointing to the 3-year lows hit at end-June and end-December 2013.
"Friday saw the [precious metals] complex continue its collapse," says Marex Spectron's David Govett in London, "and find virtually no support.
"Yes, there was some physical demand evident in gold at the lower levels, but this paled into insignificance with the amount of selling."
Already by Tuesday last week, latest data from US regulators the CFTC show, speculative traders as a group had
raised their bearish betting against gold on Comex futures and options to the largest level of 2014 to date.
Speculative short positions in silver hit their second highest level since 1995, beaten only by start-June's record at four times the twenty-year average.
The Shanghai Gold Exchange's new-look website today showed prices for gold bullion delivered in China dropping much closer to international quotes on Monday, cutting last week's $5 premium nearer $2 per ounce on strong trading volumes.
The SGE's international bourse however – launched to much fanfare last week – failed to record a price for its key 995-fine gold contract after showing
very quiet volume Friday.
"Right on the Shanghai open," says a note from traders at Swiss refiner MKS, "some aggressive selling in silver came in, with [prices] trading in a straight line [down]."
"It looks like we can see further long liquidation" for bullish silver derivatives contracts, Reuters quotes a trader based in Sydney, Australia.
"The next key support is at $16.60...If we do trade under $17, there will be significant stop-loss orders around that level."
Silver prices have now fallen in 9 of the last 10 weeks, notes a technical analysis from Scotia Mocatta, the London market-making division of Canada's Scotiabank.
In gold, "Weekly momentum indicators are suggestive of further acceleration, and we anticipate further decline, expecting a test of the [New Year] low of $1182."
Gold bullion held to back shares in the SPDR Gold Trust (NYSEArca:GLD) – the world's largest exchange-traded fund by value at its 2011 peak – shrank Friday to the smallest quantity since December 2008.
Down almost 3% from the start of this year to 776 tonnes, the GLD's gold bullion backing has now shrunk 42% from its peak at 1,350 tonnes at the end of 2012.
Silver holdings, in contrast, have risen to new all-time highs in the giant iShares trust (NYSEArca:SLV), reaching 10,589 tonnes and swelling almost 6% since this time in July.
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