Gold News

Gold Trading 'Hits Profit-Taking' Before ECB But Moving Averages 'Will Support' After 'Golden Cross'

GOLD TRADING recovered a $5 per ounce drop in London trade lunchtime Wednesday, with bullion standing at $1255 as Western stock markets rose again ahead of tomorrow's negative-interest rate and QE decision from the European Central Bank.
Brent crude oil crept back above $40 per barrel for the first time in 3 months, but iron ore dumped half of Monday's record 19% one-day jump.
Despite expectations that the ECB will extend NIRP still further on Thursday, government bond prices fell across the board, pushing 10-year German Bund yields higher from last week's 10-month low beneath 0.11%.
The Euro slipped below $1.10, keeping the gold price for single-currency investors trading in line with last week's finish at €1144 per ounce – a 13-month high when first reached in February. 
Bullion priced in Dollars held 2% below last week's 13-month high near $1280.
"Gold has finally succumbed to some profit-taking," says a trading note from London brokers Marex Spectron.
"The trend of the first couple of months seems to be over."
After gold trading "pierced through the multi-year [down] channel at $1264, a monthly close above this [level] will be of prime importance," says a technical analysis from French investment bank and bullion market maker Societe Generale, calling Friday's peak of $1280 and then Monday's $1277 "a probable double top" – classically a bearish pattern, which a "move below $1245 will confirm."
But after gold's underlying price direction saw a "golden cross" on analysts' charts at the end of February, inviting momentum traders to buy the uptrend, the metal's 50-day moving average "has [now] crossed the 100- and 200-day MA from below," notes Canadian bank and London market-maker Scotia Mocatta, "and the 100-day MA is set to pierce the 200-day MA as well."
On gold's global benchmark, the 3pm LBMA price set by auction between the largest bullion traders, the 50-day average rose above both the 100- and 200-day averages at the end of February 2016 – a position seen briefly in the spring and then late-summer of 2014.
For a decade starting June 2001, gold's 50-day moving average held above the 100-DMA and 200-DMA on 73% of all trading sessions.
The 100-DMA only lagged the 200-DMA on 306 of the 2,704 trading days starting July 2001.
Chart of gold price's 50-day moving average, 100-dma and 200-dma
"We think the [moving averages] should gradually catch up to the current price level and lend some support," says Scotia.
Gold trading on Shanghai's government-approved bourse meantime held firm Wednesday at almost twice average levels, but it still shrank to only half of Monday's new record, when 87 tonnes-worth of the main Au(T+D) contract changed hands.
Compared to the world benchmark of London settlement, Shanghai gold prices today rose to a premium of $2.50 per ounce – back in line with the average incentive offered to new imports – as the Yuan reached a 3-week high versus the Dollar on the FX market.

Adrian Ash

Adrian Ash, BullionVault Gold News

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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