Gold News

Spot gold sits below New York stop-losses; long-term bull market rolls on

Spot gold prices recovered barely $1 during Asian trade Thursday, holding flat around $664 after crashing through key technical levels early in New York on Wednesday.

"There has been a little bit of buying back after the fall," said one futures trader in Sydney earlier.

"It is just a rebound on the buying side."

The price of physical gold bullion sank 1.5% yesterday to touch a six-week low of $659.90.

Gold priced in Euros hit a two-month low of €489 per ounce. It opened London today at €490.50 – more than 2.1% lower from Thursday last week.

"In New York, large funds gunning for sell-stops flooded the market," says today's technical note from Standard Bank.

"The metal broke through technical support at $665 which led to stop-loss selling. There were insufficient buying interests at the lower levels.

With investors wanting to buy gold now finding it below previous support at $665, says Standard Bank, "it could remain under immediate pressure, with the next key support level around the 100-day moving average of $658."

That level also coincides with the uptrend beginning in Oct. last year. (Why has the 'hot money' quit gold this month? Find out here...)

In Tokyo gold prices today played catch-up with last night's action in New York.

The Tocom's contract for gold delivery in April '08 dropped 0.8% to the equivalent of $670.32 per ounce.

Electronic trading in Comex gold futures priced bullion for delivery in Oct. this year at $673 per ounce – a drop of more than 5% that will leave leveraged investors facing an ugly margin call.

"The bullish momentum of the market has fizzled out," said Tom Hartmann, a commodity broker at Altavest in California, to Bloomberg yesterday.

"A lot of the foreign currencies are taking a hit today because of the Dollar strength."

The Dollar's bounce – apparently driven by mixed-to-weak US housing data – knocked one cent off the Euro to $1.3510.

The Euro itself today faces new fears that the Eurozone's pan-national currency union cannot hold together.

"The Banco de Espana's holdings of foreign currencies and gold have fallen to €13.2bn," reports The Daily Telegraph in London today – "equivalent to 12 days of imports."

Spain's current account deficit, driven by the low interest-rates brought about by currency union, is now running at 9.5% of GDP.

Over the past two months, the Spanish central bank has sold 80 tonnes of its gold reserves – alongside US Treasuries and British gilts – to help cover Spain's overseas debts.

The Banco de Espana's foreign reserves have now fallen by two-thirds. Greece and Portugal have seen a similar drop for the same reasons. (Get a full report on the Euro & its economic weaknesses here...)

According to Bloomberg's data, gold has moved in the same direction as the Euro 74% of the time during the last year.

But gold's sell-off over the last fortnight – and its failure to hit the much-vaunted $700 level in April – has come despite growing investor acceptance of steadily rising prices for physical gold bullion.

Over the last three months, said the World Gold Council on Wednesday, average gold prices rose by $100 per ounce.

"It's not the absolute price gold reaches," explained George Milling-Stanley of the WGC to Reuters.

"It's how it gets there" – and the stepping-stone rise in gold bullion prices continues.

Jewelry demand rose 38% in Dollar terms. Total demand for physical gold bullion rose by more than one-fifth over the same period last year.

If you'd like to take advantage of the current pullback, click through to www.BullionVault.com for easy, low-cost access to professional gold prices now...

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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