Gold price toying with 2010 low, move below $1,160 looks likely

Otmane El Rhazi from The Bullion Desk.

Gold prices were hovering just above four-year lows on Tuesday morning, pressured lower by more positive US data, making a move below $1,160 ever more likely.

Spot gold was last at $1,166.20/1,167.00 per ounce, up $1.70 on Monday’s soft close and confined to an intraday $5 range, with the dollar continuing to trade at near five year highs at 1.2498 against the euro.

“The precious metals remain weak – gold is languishing around its lows and is therefore vulnerable, as is silver. Platinum is holding up slightly better while palladium looks more robust, with a potential double bottom in place,” FastMarkets’ William Adams said.

Even at these lows and with physical premiums evaporating, however, Asian buyers are holding off in the anticipation of further price falls.

“China clearly had no interest early on with the Shanghai Gold Exchange dipping into $1-2 discount territory early in the session, but did manage to bounce back to around $1 premium during their afternoon session,” MKS Group said.

“Both oil and gold seem to be sharing the same fate, namely oversupplied markets with little in the way of either fund or physical buying. In addition, the stronger dollar is weighting on both complexes, as is the fact that both sets of charts look pretty terrible,” it added.

Sentiment has already been dampened by a second poll on the Swiss Gold initiative to force the Swiss National Bank to make physical bullion 20 percent of its assets – the latest poll indicates dwindling support for the ‘yes’ vote.

But one- and two-month gold forward offered (GOFO) rates, often used as a barometer for physical bullion demand and price changes, remain in backwardation.

From a macro perspective, updates on the state of several of the world’s major economies are due this week, which could offer some support – investors will look for signals of changes in economic momentum, FastMarkets analyst Tom Moore said.

Already today, in a subdued day for data releases, the Japanese final manufacturing PMI undershot marginally at 52.4, while the Spanish unemployment change disappointed at 79,200.

The US trade balance and factory orders data are due later but tomorrow’s job’s numbers and the ISM non-manufacturing PMI will attract more attention.

While further weakness is likely, the metals look very oversold “so it might not take much to prompt short-covering”, he added.

In the other metals, silver is once again around $16.00 – it was last four cents lower at $16.03/16.09 per ounce and trading within a 15-cent range.

CFTC data shows that the funds trading Comex silver are increasingly polarised, with 57,469 longs and 51,537 shorts in place – this raises the chance that one side will throw succumb to selling pressure, which suggests silver prices are likely to get more directional again either as the longs cut their losses or the shorts cover, Adams also said.

In the others, palladium was been bolstered by strong US vehicle sales data – it was last at an unchanged $796/801 per ounce – while platinum was $2 lower at $1,223/1,228.

(Editing by Mark Shaw)

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