Gold prices were down modestly on Tuesday but there are signs that yesterday’s heavy selloff was due to excessive speculative trading.
Gold for August delivery on the Comex division of the New York Mercantile Exchange was last down $2.70 or 0.2 percent to $1,104.10 per ounce. Trade has ranged from $1,095.90 to $1,108.80.
On Monday, prices fell precipitously as a “flash crash” of precious metals sent prices down five percent on the opening of the Asian trading period.
Eventually, the price fell to $1,080.00 – the lowest level in half a decade – but retrenched to the current level, indicating a rundown of prices wasn’t rooted in fundamentals or global news.
“The disproportionately sharp fall in the price of gold as compared with other precious metals points to a high level of speculative selling interest,” Commerzbank said. “We believe that the price slump meanwhile is clearly exaggerated – from a technical viewpoint, gold has slipped seriously into oversold territory.”
A factor that could weigh on gold throughout the year is an impending interest rate rise from the US Federal Reserve.
The tone in recent weeks from various Fed members has grown hawkish with St. Louis Fed president James Bullard placing odds of “more than a 50 percent probability” of a rate rise in 2015, in a recent interview with Fox Business.
Turning to wider markets, Germany’s DAX and France’s CAC-40 were down 0.3 percent and 0.1 percent respectively, while the euro was 0.3 percent stronger at 1.0858 against the dollar.
There is no significant data due for release today with EU consumer confidence and US weekly unemployment claims on the agenda for tomorrow.
As for other precious metals, Comex silver for September delivery was basically unchanged at $14.755 per ounce. Trade has ranged from $14.615 to $14.840.
Platinum for October settlement was down $2.90 to $985.70, while the most actively traded palladium contract was at $614.35, up $2.30.
(Editing by Tom Jennemann)
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