Gold News

"Technicals Dominate" Gold Prices But "Algos Disappointed" as Trading Stays "Dull"

GOLD PRICES gave back a $5 rally Wednesday lunchtime in London, trading back at $1282 per ounce as European stock markets reversed earlier losses following strong Eurozone manufacturing data.
 
China's manufacturing sector contracted for the fourth month running on the HSBC PMI index.
 
Gold prices are being "undermined by improving macro data and reports that China imports tied to financing demand," reckons Robin Bhar, analyst at Societe Generale, pointing to last week's comments on China's gold trade financing from market-development organization the World Gold Council.
 
"The only real support for gold prices," says Germany's Commerzbank in a note, "is coming from any tension that still exists in the Ukraine."
 
"In line with our expectations," says Russian investment bank VTB's gold-dealing desk, "the market has reached early April's lows already."
 
Gold prices "could still consolidate a little in dull trading this week," it adds, "unless selling intensifies on a sustained close below $1278/80 per ounce."
 
Also looking at gold price charts, "Technicals dominate direction," says the trading desk note from Standard Bank's commodities team – currently being acquired by China's ICBC – "and again technicals indicating trend is to the downside.
 
"With a decisive break under 1278," says Standard, gold prices "could see $1255/1240 next."
 
Tuesday's action questioned the importance of that level, however, "to the chagrin of the algos [computer programs] and day traders," says brokerage Marex Spectron's London team.
 
"The follow through was fairly non-existent and the market held reasonably well and closed back in the 1280s."
 
Looking at the US gold derivatives market, "technical trading" ahead of tomorrow's expiry of Comex options for May "[is] keeping gold from a vigorous rally," says George Gero at RBC Wealth Management in New York.
 
"Tomorrow night we may see beginnings of volatile up and down on Friday."
 
Meantime in China, the Shanghai Gold Exchange's most active contract ended Wednesday some 75¢ per ounce above equivalent London quotes, marking only the 6th such premium to international benchmarks in the last 9 weeks.
 
London gold borrowing costs today edged back, slipping for the second day running from last Thursday's new 8-month highs.

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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