Gold News

Gold Price "Can't Rise" as Weak Asian Demand, Technical "Correction" Take Out 50- and 100-Day Moving Average

GOLD PRICES headed for their lowest Friday close in 6 weeks in London today, trading sideways at $1295 per ounce as European stock markets failed to follow Asian equities sharply higher on the day.
 
With Shanghai's stock market closing the week 2.9% higher, Shanghai gold prices ended 1.5% down at the lowest since 19 June.
 
India's Gems & Jewellery Export Promotion Council said gold bar imports to the world's former No.1 consumer nation doubled last month from the same month in 2013.
 
But in what Reuters calls "a seasonally slack period", improved supplies have seen Indian premiums over London gold prices halve this week, falling as low as $5 per ounce vs. late 2013's record level of $160 when the current import curbs first hit.
 
"In our opinion," say analysts at Commerzbank in Frankfurt, "the weak gold demand figures out of Asia – not only China – preclude any rise in gold prices."
 
"Positive economic data put a dampener on the gold market," reckons an Asian trading desk quoted by Reuters, "as risk assets caught a bid and safe-haven buying dried up."
 
"It will be political events that provide the market with some potential direction," says a Singapore dealing note after warning yesterday morning that gold and silver "look[ed vulnerable to a correction lower."
 
Islamic State fighters seeking a medieval caliphate today claimed they'd over-run a Syrian army base.
 
The Gaza death-toll from the last fortnight's conflict with Israel was today put above 800.
 
Moscow's stock market meantime fell hard as Dutch and Australian police reached the crash site of Malaysian flight MH17 in eastern Ukraine, dropping 2.1% for the week – but holding well above this spring's 4-year lows – after the Russian central bank surprised FX traders with a half-point hike on interest rates.
 
Now at 8.0%, Russia's key overnight rate is only just ahead of Russia's latest inflation reading.
 
The Ruble rallied against the Dollar, but the British Pound fell to 1-month lows as UK GDP data met analyst forecasts for 3.1% annual growth.
 
That buoyed the gold price in Sterling at £762 per ounce, down 0.7% on the week.
 
"Gold plunged Thursday," says London market maker Scotia Mocatta's New York desk in its daily note, "falling below both the 100-day and 50-day moving averages."
 
What Scotia's analysts call "bearish trend and momentum indicators" are now "providing for ample room to the downside."
 
"The current correction should fetch 1285/81, mid-June highs," says technical analysis from Societe Generale, after the metal "failed to establish itself" at late-June's return to April's high of $1331.
 
Gold prices, the SocGen note concludes, will now need "a break above [July's] steep resistance line" coming down from the peak at $1345 and now sitting at $1300 "to prompt positive signals."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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