Gold News

Gold Trading Flat, Prices "Pressured" Despite China's Return, Looming Cut to Euro Interest Rates

GOLD TRADING was quiet again Tuesday morning in London, with prices holding tight around $1246 per ounce as European stockmarkets fell, failing to follow yesterday's new all-time highs on Wall Street.
 
"The period of indecisive gold trading from around mid-April ended with a sharp break lower," notes Japanese trading house Mitsui's Hong Kong desk, "[but] physical demand remained weak on the dip."
 
Gold prices are now "near first significant support" at $1238, says a technical analysis from London market maker Societe Generale, expecting $1200 per ounce in 1-3 months.
 
"Daily indicators are into negative territory but holding supports."
 
Monday's lower close to US gold trading marked "the fifth consecutive 'down' day since breaking the base of our two-month consolidation triangle," says fellow London market maker Scotia Mocatta.
 
"Initial target on this move is $1234...not only a cool number, but also the 76.4% Fibonacci retracement support of gold's $1185 to $1392 range since December 31, 2013."
 
Also looking at Fibonacci retracements of gold's Jan-March trading range, "We would expect an attempt to rebound here," says Swiss investment and bullion bank Credit Suisse in a technical analysis of the charts.
 
"Direct extension beneath it would target better range support at 1188/80 [where] we expect a fresh base."
 
Gold trading in China – the world's No.1 consumer market – re-opened Tuesday after the Dragon Boat holiday. But with the Yuan currency slipping further against the Dollar, "[that] gave no impetus one way or the other and prices," says London brokerage Marex Spectron.
 
"There is a fear in the gold market," Reuters quotes Macquarie Bank analyst Matthew Turner, "that various positive macro events [can] come together [to] give gold a severe blow, and this time around the Chinese demand is not going to be there.
 
"This seems to me too pessimistic," Turner says, first because Eurozone data are very weak, and second because China's lower gold imports are being matched by growing demand to buy gold in former world No.1 India.
 
Nevertheless, "The next key infection point" for gold trading "could come on Thursday," says US brokerage INTL FCStone, pointing to the European Central Bank's likely cut to interest rates. 
 
Although lower rates and possible QE-style asset purchases will be intended as inflationary, "These steps will likely push the Euro lower against the Dollar, thus pressuring gold," says the note, adding that on Friday "the Dollar could get another jolt higher when US nonfarm payrolls data will be released."
 
Eurozone inflation data today showed a new post-2009 low at 0.5% annually for May.
 
The Euro currency rose vs. the Dollar however, again bouncing from $1.3580 for the fourth time in a week
 
Bullion prices for investors trading gold in Euros fell below €914 per ounce, just above last week's new 4-month lows.

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.

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