Gold had a torrid September and suffered further losses last week of 2.2%.
Gold in U.S. Dollars, 5 Years (Thomson Reuters)
The move lower in September was technically driven as there was no negative headline data, obvious reasons for price falls or indeed evidence of physical gold selling. Most of the selling was on the COMEX and gold remained firm in Asian trading throughout the month.
Indeed, the mood music for gold is quite positive - especially the appalling western relations with Russia, Middle Eastern tensions and attendant geopolitical risk.
One plausible factor for gold’s weakness is the ever increasing, “irrationally exuberant” appetite for the dollar globally which may be impacting gold.
Despite, poor economic data out of the U.S. in recent days, the dollar has continued to eke out gains.
Poor data has not led to the bounce in gold that one would have expected. The permanently levitating stock markets have seen weakness and this may be a prelude to much larger losses.
There is increasing evidence that the U.S. consumer is struggling and close to being tapped out. Indeed, housing data has been poor recently which suggests the recent housing boom could be on its last legs. The latter scenario is likely the case which will prove bullish for gold in the long term.
Technically, gold is vulnerable to a further fall to test its bottom from July, 2010, at $1,161/oz. This is particularly the case in the very short term, in other words, this week. A breach of the $1,161/oz level could result in a rapid fall to test $1,110/oz and the long term support at $1,000/oz.
Silver in U.S. Dollars, 5 Years (Thomson Reuters)
Silver is also vulnerable after breaking below key resistance. Technical support is at $15/oz.
Therefore, short term weakness is a real risk and those considering reducing allocations should sell in the short term. At the same time, it is important to remember that with market manipulations of today, technical analysis is not as useful a tool as heretofore.
The long term fundamentals remain very sound and those who are patient and focus on gold’s strong fundamentals and still robust global demand, especially from China and India, will be rewarded again.
MARKET UPDATE
Today’s AM fix was USD 1,193.25, EUR 951.56 and GBP 746.67 per ounce.
Friday’s AM fix was USD 1,207.50, EUR 956.06 and GBP 751.03 per ounce.
Gold fell $22.00 or 1.81% to $1,191.80 per ounce and silver slid $0.29 or 1.7% to $16.81 per ounce Friday. Gold and silver both finished down for the week at 2.11% and 4.65% respectively.
Gold on the New York Globex was pushed to to its lowest level in almost 15 months at the open on Sunday night prior to gold in Hong Kong moving higher from $1,187/oz an ounce to $1,195/oz.
Singapore gold bullion markets, a key bullion trading centre in Southeast Asia, were also closed for a public holiday.
Precious metals are at multi-year lows. Platinum hit its lowest price since 2009, silver fell to its weakest since 2010, and palladium touched an 8-month low.
Gold premiums in Hong Kong were $1.20 to $1.60 an ounce to the spot London prices, in line with last week, even though there was a sharp drop in cash gold prices.
With Chinese markets closed for national holidays until Wednesday, an increase in demand should come about on the return of the world’s largest gold bullion buyer.
