Gold staged an very modest recovery in early US trading on Thursday although reversing the significant technical damage that was inflicted on Wednesday might prove difficult.
Gold for December delivery on the Comex division of the New York Mercantile Exchange was last up $4.30 at $1,106.30 per ounce. On Wednesday, the yellow metal fell to a one-month low of $1,101.50.
“Gold took out technical support levels of $1,117, $1,110 and $1,105 yesterday. This is a bearish development. We would expect the market to sell at any bounce to $1,117 and we now expect another leg lower back toward July low of $1,078,” Scotiabank noted.
Meanwhile, the FOMC meeting on September 17 is expected to trigger a more definitive price movement, especially if the FOMC decides to raise the federal funds rate for the first time since 2006.
“We expect investors to further reduce net long positions in the wake of Fed rate hikes this year and next year [along with] a higher US dollar,” ABN AMRO said. “Gold weakness is not over yet and further price falls are likely.”
Elsewhere, China’s August CPI came in at two percent, which beat the expected 1.9 percent, but its PPI fell 5.9 percent, its 42nd straight month of decline. In equities, the Shanghai composite ended down 1.39 percent at 3,197.893.
“There is increased interest in speculation that the People’s Bank of China, having been an active seller of US Treasury securities in recent weeks, has been an active buyer of gold,” Dennis Gartman, editor of the Gartman Letter, said.
“We have not seen the conclusive proof of that buying, but we’ve no doubt but that the bank has indeed been in buying gold on weakness adding to its reserve position,” Gartman added.
In other data, French final non-farm payrolls came in as expected, while the country’s industrial production disappointed. Here in the US, initial jobless claims last week fell 6,000 to a seasonally adjusted 275,000, marking the the 27th straight week that claims remained below 300,000.
In wider markets, the dollar was 0.13 percent stronger at 1.1193 against the euro, while Germany’s DAX and France’s CAC-40 were down 1.03 percent and 1.22 percent respectively.
As for the other precious metals, Comex silver for December delivery was up 8.4 cents at $14.660 per ounce. Trade has ranged from $14.535 to $14.745.
Platinum for October delivery on the Nymex was up $6.30 at $987.40 per ounce, while the most-actively traded palladium contract was at $586.70, up $8.75.
(Editing by Mark Shaw)
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