Gold vulnerable short term but real record high likely
FRANKFURT (Oct 11) Today’s AM fix was USD 1,285.75, EUR 947.15 and GBP 804.30 per ounce. Yesterday’s AM fix was USD 1,298.00, EUR 959.56 and GBP 814.51 per ounce.
Gold fell $18.90 or 1.45% yesterday, closing at $1,287.40/oz. Silver slipped $0.26 or 1.19% closing at $21.59. Platinum rose $9.20 or 0.7% to $1,382.00/oz, while palladium climbed $6.50 or 0.9% to $707/oz.
Premiums in China and India remained robust overnight. Shanghai premiums are at $28 over spot and in Mumbai premiums jumped to $30 to $40 an ounce from last week's $5 to $7 an ounce.
Bullion premiums in western markets remain flat. Gold bullion bars (1 oz) are trading at $1,335.25 or premiums between 3.75% and 4.5% and gold bars (1 kilo) are trading at $42,602 or premiums between 3% and 3.5%.
Gold is headed for the second week of losses and is looking vulnerable to further weakness technically. Gold’s close below $1,300/oz yesterday makes it vulnerable to a sell off to test the next level of support at $1,200/oz and the June 28th low of $1,180/oz.
A daily or weekly close below $1,180/oz would be bearish and could result in gold falling to test support at $1,000/oz which was previous resistance in 2009 (see chart below).
US Debt Limit (Black) Versus Gold (Gold) - Bloomberg
Gold analysts have turned the most bearish in a month on increased confidence that U.S. lawmakers will reach a deal to avoid default. Fifteen analysts surveyed by Bloomberg News expect prices to decline next week, eight are bullish and four neutral, the highest proportion of bears since September 13.
Analysts are citing an increased confidence that U.S. lawmakers will agree to a deal to avoid default coupled with a decrease in physical Asian demand. Although there is little evidence of any decrease in demand from Asia as seen in robust premiums and import figures.
Prices rose since the first partial U.S. government shutdown in 17 years began October 1st, as investors sought a haven. President Barack Obama has not accepted or rejected a House Republicans’ plan to increase the debt limit and end the government shutdown as the two sides entered further talks.
A new and potentially large source of demand and gold buying may soon come from Russia. OAO Moscow Exchange, Russia’s stock and currency exchange, will introduce trading of deliverable gold and silver bars as early as this month. It is part of plans to make precious metals more accessible to Russian investors and savers.
The exchange will quote gold and silver in Russian rubles per gram, with minimum trades starting at 10 grams of gold and 100 grams of silver, the bourse’s Deputy Chief Executive Officer Andrey Shemetov said in an e-mailed response to Bloomberg questions yesterday. Most metals trading in the country takes place via the over-the-counter market, which is dominated by Russia’s biggest banks, such as OAO Sberbank. The exchange is hoping to work with mid sized and smaller banks by reducing transaction costs.
The Moscow Exchange is following the Shanghai Gold Exchange in listing precious metals to augment over the counter, or OTC, trading and broaden the range of instruments available for hedging and liquidity purposes.
