Gold News

Spot gold prices slip as May '06 dents the uptrend

Spot gold prices ticked lower during the Asian and early European sessions on Thursday, failing to hold Wednesday's bounce to $680.

Gold bullion had dropped nearly 1.5% ahead of yesterday's US Fed decision on Dollar interest rates, moving on news that US stocks of crude oil in reserve were six time higher than expectations.

But despite a unanimous vote for "no change" – plus fresh quibbling about "mixed" indicators in the Fed's accompanying statement – both gold and the Euro failed to rally overnight. (Find out why Fed rates matter to gold here...)

By 10:40 in London on Thursday, physical gold bullion was quoted at $678.02 per ounce, unchanged from a month ago at the lowest Dollar price of gold in a week.

"The fact we didn't get through $691 last week suggests we may now start to test the lower end of [gold's trading] range," said Jonathan Barratt of Commodity Broking Services in Sydney to Bloomberg earlier.

"It's still relatively supportive, but I think a few investors are getting a bit annoyed that the market has not gone on through that $691 area again."

Many investors will be more than a bit annoyed, however, that gold has failed to regain its quarter-century highs of May 2006.

For the first time since this bull market began in 2001, gold is now trading below its price of a year ago (see the chart here). Longer-term investors shouldn't be surprised if disappointed traders and fund managers chose to sell out this week.

Monday's failure to break resistance above $691 – followed by a near 2% sell-off on Tues and Weds – coincided with the 12-month anniversary of last May's huge spike above $725 per ounce.

The spike seen in mid-May last year, however, was followed by a 14% drop to $625. It then sank – twice – to just above $570 per ounce.

So at current prices, gold will stand significantly higher year-on-year by the start of June. Momentum traders may choose to buy on the bounce in year-on-year gains.

Longer-term gold bulls, on the other hand, will no doubt stick with the metal for as long as global rates of real interest remain near multi-decade lows – and the global supply of money and credit continues to surge at double-digit rates. (Read more here...)

"Although the current bull run would seem to have been put on hold temporarily in the interim," says today's comment from Standard Bank, "the longer term outlook remains relatively intact.

"Expect support to emerge in the $675-$670 band and continued resistance to start from $690, with a close above $695 a strong signal suggesting continued strength into the $700s would be imminent."

If you'd like to buy gold today – at spot prices on a $3 spread or better – then click through to now...

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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