Gold came under pressure yesterday as new highs prompted some profit-taking

Gold came under pressure yesterday as new highs prompted some profit-taking. The selling gained momentum as Asian participants questioned the sustainability of the recent renewal of confidence in financial markets. However, there was good support evident at the $1,645 level for gold, which limited the losses among the other precious metals. This support seemed to stem largely from Chinese buyers stocking up ahead of the New Year holidays (with tomorrow being the last day of work for many Chinese).

Sticking with China, many are anticipating the PBoC to lower reserve requirements by tomorrow. This is also adding to support for Gold, and metals in general. However, as outlined yesterday, we find that historically, changes in the reserve requirement have little bearing on commodity prices over the long term. Therefore, any positive reaction to a lowering of reserve
requirements we would deem as knee-jerk, with a downward correction following soon afterwards.

This morning we’ve seen gold see-saw, with upward momentum quickly stymied by profit-taking and physical interest preventing prices from falling too far. The rest of the precious metals complex continues to take gold’s lead on the up, although PGM have come under more downward pressure. The weight on PGM is most likely due to markets finally moving on from the Eskom story in South Africa. Dollar movements, in particular against the euro, once again appear as a major driver of Gold prices. To this end, the dollar’s reaction to this afternoon’s US industrial production data could have a significant bearing on Gold.

Gold support is at $1,642 and $1,629. Resistance is $1,669 and $1,682.

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also wai...
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the...
Read more

Disappointing non-farm payrolls data - Gold price back to 1,600 Level

Image
The gold price surged higher Friday morning, by $49.77, or 3.2%, to $1,612.48 per ounce following a very disappointing report on the U.S. labor market.  The spot price of gold hovered near $1,550 in overnight trading, but turned sharply upwards following the worse than expected non-farm payrolls report for May. The May employment report showed that the U.S. economy added only 69,000 jobs, far below the 150,000 consensus estimate among economists and even less than the lowest forecast of 75,000.  Furthermore, the April non-farm payrolls figure was revised downward from 115,000 to 77,000 while the March data was cut from 154,000 to 143,000.  As for the unemployment rate, it climbed from 8.1% to 8.2%. Commenting on the jobs data and the implications for the gold price, Saxo Bank vice president Ole Hansen stated that “(The report was) very poor and confirmed the midcycle slowdown in the United States.  Whether it will be enough to change the mind of t...
Read more