Gold News

Gold Trading Firm in Shanghai, Quiet in London as "Price Recovery" Points to $1268 as Key Technical Level

GOLD TRADING in London was quiet again Tuesday, with prices drifting back below $1250 per ounce for the second day running after hitting new 4-week highs in Asian hours.
 
European stock markets crept back to break-even for the day after Asian equities followed New York down.
 
The Euro was flat with commodities and bonds, but the British Pound recovered half last week's 1.5c drop to reach $1.64 despite new data showing UK inflation dropping to a four-year low of 2.0% per year – the Bank of England's mandated target.
 
That nudged the price for UK investors trading gold back below £760 per ounce, a 3-year low when first breached at the start of last month.
 
"[This] thin and dull market may provide a small catalyst for some sort of movement," says London brokerage Marex Spectron in a gold trading note.
 
"A recovery is underway," says gold price analysis from Societe Generale's technical team.
 
"Short-term, another up leg should shape to 1258 [and] 1268."
 
Should gold move above December's Dollar high of $1268, that "would be a bullish signal", agrees Russell Brown at ScotiaMocatta, the precious metals trading division of Canada's Scotia Bank, in New York.
 
A daily close for New York gold futures trading above that $1268 level, says Commerzbank technical analyst Axel Rudolph, could see a rise to $1327 or even $1375.
 
But for now, and linking the tops in the gold price since October 2012, "Long term downtrend line is seen at $1269," he adds.
 
Overnight in Shanghai, gold prices edged higher again even as the Yuan was set at new all-time highs against the US currency by the Beijing government, worth a record 6.0415 per Dollar.
 
Trading volumes on the Shanghai Gold Exchange were firm ahead of the Chinese New Year, starting 31 January. But the premium above London gold prices slipped beneath $14 per ounce, down from last week's 6-month high of $18.
 
"Demand for physical gold from Asian investors was an important support for the market in 2013," says the latest Commodities Weekly from French investment and bullion bank Natixis.
 
But although China's demand to buy gold is "expected to remain strong" in 2014, on a fundamental level says Natixis analyst Nic Brown, "Events in the US will most likely continue to have the biggest impact on gold prices.
 
"As the economic situation continues to improve, so gold prices are at risk of further declines if interest rates rise and the need for a safe haven dissipates."
 
"[Gold can still] provide good insurance against crisis, higher taxes and inflation risks," reckons $1 billion hedge fund manager John Brynjolfsson, citing China's demand and Middle East tensions for continuing to hold exposure to bullion prices.
 
Also speaking to the Wall Street Journal, portfolio manager Nic Johnson, whose $100 million Pimco Commodity Alpha Fund includes gold trading positions, says he backed a higher price when it fell towards $1200 per ounce last month.
 
But Johnson then sold last week, because he "felt that the probability of a further rally past $1240 was small."

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.

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

 

 

Market Fundamentals