Both gold and silver gave back the previous day’s gains yesterday on the COMEX. Gold finished trading in New York on Friday at $808.30, down $17.20 and silver was down 58 cents to $14.23. Gold continued to fall in Asian and early European trading and is trading at $782.80/783.40 per ounce (1100 GMT).
The bloodbath in the precious metals arena continued yesterday, overnight and this morning and the scale and speed of the selloff has surprised even the very bearish.
The dollar’s continuing sharp rally to new record monthly highs against most major currencies (as high as 1.4696 against the euro this morning ) has seen gold’s brutal recent sell off continue. In conjunction with the dollar’s continuing rally we have seen oil prices continue to fall (Light Sweet Crude Oil Future – SEP08 at 113.20 down 1.57%.)
Considering the extent of technical damage done in the last two weeks, it is time to be cautious about any possible support levels but $750 is the next level of technical support. While technical damage has been significant, physical demand is extremely strong at these levels. There is much anecdotal evidence of shortages in the physical bullion market with some US wholesalers out of stock of Kruggerands (1 ozt) to sell to the retail investment marketplace. Also industrial users of the metals see these low prices and a significant buying opportunity.
It is worth remembering that gold’s price of 12 months ago was $650 and we are still up 20% since the start of the credit crisis ($650 to $784). A mean feat considering the extent of declines in other markets.
Considering the extent of technical damage done it would be expected that a further period of consolidation at these lower levels may be necessary prior to a reversion of the trend.
The big ‘M’ or momentum is still down and a few days or higher prices and or a higher weekly close will be needed before nervous longs move into the market in bigger volumes.
The fundamentals of gold remain very sound as the macroeconomic fundamentals continue to deteriorate. Financial data yesterday internationally was very poor, particularly the jobs and inflation numbers in the US. Geopolitical risk remains to the fore as well as the Russian- Georgian crisis looks set to deepen. In the short term the trend remains firmly down however the medium and long term fundamentals remain sound.
Today’s Data and Influences
Various important US figures are released today including the TIC’s report for June, as well as the Empire State (manufacturing index) and Michigan Consumer Sentiment surveys for August.
Gold and Silver
Gold is trading at $782.80/783.40 per ounce (1100 GMT).
Silver is trading at $13.86/13.90 per ounce (1100 GMT).
Platinum is trading at $1384/1390 per ounce (1100GMT).
Palladium is trading at $286/290 per ounce (1100 GMT).