Confluence of Technical Factors Suggest Support Between $1,019/oz and $1,025/oz – Technical Analysis & Bloomberg Chart

Gold
Gold rose nearly 1% to close at $1,076.50/oz in US trading. It then range traded between $1,074/oz and $1,080/oz in Asian trading this morning. Gold is currently trading at $1,080.00/oz and in euro and GBP terms, gold is trading at €783/oz and £686/oz respectively.

Gold’s technical situation remains bearish after its recent break down below previous support $1,075/oz. However, there would appear to be strong support at the $1,000/oz to $1,030/oz price level which was previous strong resistance. Significantly, the 200-day moving average has now edged up to $1,024.80/oz and the 200 day moving average could again provide support. Also of note is that the Fibonacci retracement level of 38.2% is at $1,019/oz which is another support level. This is the 38.2% retracement of the move up from the October 2008 lows at $682.66/oz to the December 2009 record nominal high of $1,226.50/oz.

(Click on the image to view full size).

A weekly close below these levels (200 DMA at $1,024.80/oz and Fibonacci 38.2% level at $1,019/oz) and the important psychological level of $1,000/oz would be damaging to gold technically.

However, the degree of physical demand at these price levels as being experienced by dealers and seen in premiums in India, Vietnam and the Far East would suggest that gold may find support above $1,000/oz. China’s $300 billion sovereign wealth fund’s diversification into the SPDR gold ETF (see news below) is a further indication of demand for gold above the $1,000/oz price level.

Silver
Silver started the day at $15.38/oz and went as high as $15.58/oz earlier in Asia. Silver is currently trading at $15.47/oz, €11.25/oz and £9.85/oz.

Platinum Group Metals
Platinum is trading at $1,505/oz and palladium is currently trading at $420/oz. Rhodium is at $2,475/oz.

News
– China’s sovereign wealth fund, the China Investment Corporation has taken a $155 million stake in the SPDR Gold Trust. This underlines China’s voracious appetite for commodities and a desire to diversify its vast holdings of foreign exchange reserves which consist primarily of US dollars . This has led it to make its first investments in commodity-related exchange-traded funds and in the SPDR Gold Trust, the largest gold ETF. The stake of 1.45m shares is worth about $155.6m, or 0.4 per cent of the SPDR’s assets. It is a small investment considering the massive size of the Chinese sovereign wealth fund of some $300 billion but may represent the start of a more long term strategy to diversify into gold.

– Thousands of Greek civil servants went on strike Wednesday against wage cuts, paralysing flights and disrupting rail traffic as Athens grappled to fight a debt crisis that has shaken Europe. The day-long strike comes amid reports that Germany is considering how to help Athens and contain any spillover to the other 15 countries that share the euro. The action – which is set to cripple the work of ministries, local administrations, educational institutions and tax offices – will be another test of the resolve of Greece’s Socialist government.

– China’s exports and imports grew substantially in January year on year. This suggested that global demand for Chinese made goods is continuing and Chinese consumers are spending too. The data came a day after figures from Germany confirmed that China had overtaken it to become the world’s largest exporter last year. January’s exports from China were up 21%. Imports rose by almost 86%.

– UK 10-year bonds fell on growing concerns that the government may struggle to sell record amounts of debt as inflation accelerates. The drop pushed the 10-year security’s yield near the highest this month as global gains by stocks cut demand for the perceived safety of fixed income. The UK sold 2 billion pounds ($3.1 billion) of bonds yesterday, part of 225.1 billion pounds of sales planned for the fiscal year through March.

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Mark OByrne

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