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 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

 

 

Market Fundamentals