GOLD PRICES headed for their best monthly rise in a year on Friday, slipping back to $1110 per ounce as world stock markets gained, but trading 4.6% higher from the start of 2016.
Gold's best monthly gain in Dollar terms since January 2015, that contrasts with the 7.4% drop in US equities – the hardest fall in the S&P 500 index since the Greek debt crisis broke in May 2010.
"The long-advocated support of $1045 proved to be significant," says a technical analysis from French investment and London bullion bank Societe Generale, pointing to the 6-year low hit by gold prices both in November and then early December.
"It has been followed by a recovery and more importantly by the formation and then confirmation of 2 bullish reversal patterns – a Double Bottom [at $1045] coupled with an Inverted Head and Shoulder[s]."
With the distance between gold's low point and the 'neckline' of that second pattern projecting a rise of the same amount, "Gold is approaching a first significant hurdle at $1130," SocGen says, /36, the 61.8% retracement of last fall, the upper limit of the up sloping channel in force since last December and the projected target for the 2 bullish reversal patterns.
Friday's drop below $1115 would, on the French bank's analysis, "mean retracement towards $1106 and even $1097/1093."
Fundamentally, meantime, "If you look for good news [in gold] you can find it," writes Tom Kendall at Chinese-owned ICBC Standard Bank – part of the world's largest banking group – pointing to strong Chinese gold import data, growing inflows to Western ETF products, and this week's "moderately dovish" comments from the US Federal Reserve.
"But most of [this] is confirmation of events past.
"Looking forward, we remain sceptical that physical demand will be sufficiently strong to keep the price above $1100 once we reach the [Chinese] Lunar New Year" at the end of next week.
The Bank of Japan
surprised analysts and traders overnight by cutting the interest rate it pays on commercial banks' deposits to minus 0.1% - the first negative rate from Japan, which began slipping into deflation over 25 years ago, cutting its key lending rate to 0% at the turn of the century and also beginning QE money creation to try and devalue the Yen long before the Swiss, US, UK or Eurozone did the same.
"[Tokyo's] comments that if necessary it could move rates further into negative territory unsettled the precious metals this morning, says the new Daily Digest from precious metals analyst Jonathan Butler at Japanese conglomerate Mitsubishi, thanks to the Dollar's sharp 2% gain against the Yen helping dent gold and silver prices.
Fixing on Friday at $14.08 per ounce, silver lagged gold's strong monthly gain, adding 1.9% and seeing the sharpest 1-month outflows from major exchange-traded fund product the iShares Silver Trust (NYSEArca:SLV) since May 2015.
Gold, in contrast, saw the amount of bullion needed to back shares in the giant SPDR Gold Trust (NYSEArca:GLD) rise by the most since January last year, adding 26 tonnes to reach a 7-week high of 669 tonnes.
