2011-11-30

Gold price held steady near $1,719 per ounce

The gold price held steady near $1,719 per ounce Wednesday morning as the gold consolidated following yesterday’s rally. The price of gold oscillated between gains and losses in overnight trading as it mirrored the general path of the euro/U.S. dollar currency cross. The euro traded near unchanged against the greenback at 1.3319 this morning, while European equity markets were mixed. U.S. markets looked to open moderately in the black, with S&P 500 futures up 0.4% at 1,195.25.

Commenting on the outlook for the gold price, J.P. Morgan metals strategist Michael Jansen wrote in a note to clients on Monday that “In as much as broader financial deleveraging is continuing to pressure the gold price the reality is that the retail sector is a strong buyer on dips as judged by the move towards record levels on length in the ETF sector, now above the 2350mt mark.”

“Gold’s next level of main resistance is in the $1730 – $1770 area,” Jansen added. “We remain friendly basis the ongoing instability both in the US and Europe around sovereign finances but note that gold continues to be a victim of the broader USD squeeze that has seen the USD rally to around 80 on the DXY index after spending the majority of this year bumping around in the 72-75 trading range. There is some secondary US home sales data out today (expected at 315k for the month of October, a fractional increase from September) and the key focus will be on headlines and sentiment as it pertains for the direction of EU and ECB policy in the next two weeks.”

Jansen went on to say that “In this environment we think that the base metals will struggle to maintain upside momentum but do expect to see bottom-picking emerge in the precious metals space. The gold market is quite clean in terms of positioning in the leveraged space and the consolidation in the $1680-$1700 area seems to have seen a strong change of hands in positioning; the weak longs bailing.” He concluded by predicting that the gold price will “grind out a move towards the $1770-$1800 area in the coming month.”

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