Gold News

Gold Price Charts "Firmly in Downtrend", Analysts Worry "$1180 Won't Hold" as Trading Sentiment Nears 30-Year Low

GOLD PRICES retreated 1.2% on Wednesday from yesterday's short-covering spike, with charts of London quotes dropping near to unchanged for the week so far below $1220 per ounce as world stock market flat-lined with commodities.
 
The US Dollar rose to new 15-month highs vs. the Euro after business sentiment was reported lower on Germany's Ifo index.
 
US Treasury bond prices slipped, nudging 10-year bond yields up to 2.54% per annum – some 11 basis points higher from this time last month.
 
Silver dropped half Tuesday's rally to trade at $17.58 per ounce, barely 20c above Monday's new 4-year low on the Dollar-price chart.
 
"Ongoing ETF outflows [from investors selling shares in trust funds backed by gold] are likely to have prevented any sharper rise in price [Tuesday]," says one commodities desk in a note.
 
Compared to the price of corn, says a chart from trading advisors AgriVisor LLC, gold has never been more expensive since 1975, when US corn futures contracts began trading, pointing to which way "investment money might be channeled."
 
"There's no material change in gold's downward trend," says China's Citics Futures analyst Zhu Runyu to Bloomberg, "even with ongoing geopolitical tensions.
 
"A rise in US interest rates is [only] a matter of time, which will push up the Dollar and weigh on gold."
 
"There's been only one time in the past 30 years," says Dow Jones columnist Mark Hulbert of his proprietary Gold Newsletter Sentiment Index, "when [sentiment against gold] got any lower than it is today.
 
Reviewing trading tips based on gold price charts, "That [low] came in June 2013," says Hulbert.
 
"Within a couple weeks, gold began a rally that by late August had tacked more than $200 on to the price."
 
Looking at gold's price chart, "The $1180 number is approaching again," says UK investment magazine MoneyWeek's Dominic Frisby, where "gold found support twice in 2013" in June and December.
 
"I'm worried it won't hold," says Frisby, "[and] after $1050 the next big levels of price support for gold are $850 and $730.
 
"I would be surprised to see either. But trends can go on much longer than anyone expects – and we're in a downtrend for gold and silver."
 
"Gold's outlook is negative," agrees a new technical analysis of the price charts by Karen Jones at Germany's Commerzbank.
 
"Below $1200 we look for losses to the December 2013 low. It's expected to hold the [first] test, but we favour an ultimate break lower, initially to $1155 [or] 61.8% [Fibonacci] retracement of the entire move from 2008."
 
Fundamentally, meantime, Swiss investment bank and London bullion market-maker Credit Suisse – which declared " the beginning of the end of an era" for gold ahead of the spring 2013 price crash – said in a new analysis Tuesday that Indian consumer demand is set to buoy gold prices as 2014 ends, with the pick-up then continued by Chinese New Year demand.
 
"Sources" tell the Hindustan Times in Mumbai that 50 tonnes of gold have been smuggled into India – the world's largest importer and consumer until 2013's anti-import rules were imposed – in the last 10 days alone, seeking "to cater to a surge in demand for the precious metal in the festive season."
 
With India's "closed" period of Shradh ending on Hindu calendars Wednesday, seasonal gold demand now typically rises until the annual peak of Diwali, the "festival of lights" falling in late October 2014.

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

scri

Market Fundamentals