Gold News

Spot Gold Price Slips as Dollar Rallies, "Risk Sold" in Asia, But Weekly Chart "Bullish" in Absence of "Financial Stability"

Spot Gold prices fell in Asian and early London trade on Monday, dropping to a 3-session low of $1354 an ounce as the US Dollar rallied and Asian stock markets ended the day lower.

Only New Zealand and Bombay stocks avoided a drop in Asia-Pacific trade, while US crude oil contracts slid to a 1-week low of $80.35 per barrel.

Copper also fell 1%. Silver Prices fell below $24 an ounce for the first time since Wednesday.

"This bubble will likely be pricked only when economic outlooks improve and unemployment figures in countries like the US drop below 8%," writes Mark Williams – a lecturer in finance at Boston University School of Management, and author of a new book on Lehman's collapse – in today's Financial Times.

But while "Gold in times of financial stability is hazardous to investor health...[and] this might come in 2011...it could take much longer."

"Risk was sold" in Asia today, says one London dealer, as the Japanese Yen rose vs. all currencies and the US Dollar Index rallied from a new low for 2010.

The Euro briefly neared a 1-week low beneath $1.3850, down more than 3¢ from Friday morning's 9-month high.

The correlation of Dollar Gold Prices with the Euro/Dollar exchange rate ended last week at a near-perfect +0.964, meaning they've been moving very nearly in lockstep vs. the US currency over the last four weeks.

That connection has only been stronger on 90 trading days since Jan. 1979.

"Gold has accelerated away from its uptrend line," notes Phil Smith at Reuters Market Technical Analysis in Beijing.

"Turnover [in Gold Futures] is still huge, and the MACD on the daily chart [a measure of momentum] is still well bullish.

"But the market is hugely overbought and ripe for correction. The turnover drive is taking the market to levels of overbought not seen since the peak in 2009."

Latest data from US regulators the Commodity Futures Trading Commission, released Friday evening, showed a new outstanding record in the number of US Gold Futures and options contracts now open.

Overall, the "net long" position in Gold Futures held by speculative, non-industry players rose to a near-record high of 1,015 tonnes equivalent, as a steep fall in the number of bearish bets held by private investors more than outweighed a drop in the bullishness of hedge funds and other "large" speculators.

New York's SPDR Gold Trust – the world's largest exchange-traded gold fund – ended last week holding 1301 tonnes of gold at HSBC's bank vaults in London.

More than 2 tonnes down from Thursday's two-week peak – and some 1.5% smaller than June's record top – that still showed a rise of nearly 15% from the start of the year.

"The weekly chart remains bullish but the daily chart is actually confirming a bearish turn," wrote Russell Browne in his technical analysis for bullion bank Scotia Mocatta late Friday, as the Dollar Gold Price "closed lower after [Thursday's] Inverted Hammer" – a chart pattern more usually seen at the end of a downtrend, where prices shoot higher during the day, but close back where they started.

"For short-term traders the sell signal has been confirmed."

But although the performance of Spot Gold price "was lackluster [on Friday] due to profit-taking," counters Ong Yi Ling, an analyst at Phillip Futures in Singapore, speaking to Reuters, "I'll still look at a bullish [short term] bias for gold so long as it's able to stay above the $1350 level."

Buying Gold or Silver Bullion today...? Make it simple, secure and cost-effective by using BullionVault...

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