GOLD PRICES recovered most of a 1.1% overnight drop from yesterday’s 8-month high of $1200 per ounce in London trade Tuesday, rising back to $1198 as European stock markets slumped again, and the Dollar fell on the FX market, following a 5% plunge in Japanese equities.
China and most of Asia remained shut for the Lunar New Year, the heaviest consumer gold-buying spree outside India’s autumn festival of Diwali.
Major government bond prices rose, pushing 10-year US Treasury yields
down to new 12-month lows at 1.73%, while US crude oil held below $30 per barrel – a level seen on the way up in 2002.
“Gold has staged a rapid and steep recovery” from late-2015’s drop to the key level of $1045, says a new technical analysis of gold price charts from French investment bank and London bullion market maker Societe Generale.
“Last month, gold formed a definite bullish candlestick formation at $1045 levels,” SocGen says, pointing to a monthly Morning Star
– deemed a key reversal pattern by technical analysis – plus “confirmed bullish patterns in the form of double bottom and inverted [head and shoulders] after which the recovery has accelerated.”
“It has now breached above a multi-year descending trend line…and is likely to head towards key resistance at [the] down-sloping channel drawn since 2013 at $1225…which also corresponds with last May highs.”
“It’s exciting to see some of the longer-term downtrend lines broken.”
SocGen’s charts show the latest jump in gold prices breaking through both the 2015 downtrend (joining last year’s May and October highs) and a longer downtrend starting 3.5 years ago (joining October 2012 with October 2015’s high).
Fundamentally, Bridges at J.P.Morgan goes on, and “even though quite a lot of money has been spent in the gold [mining] space over the last decade, there’s not a lot of new capacity.
“Gold production is rolling over.”
Reuters today quoted data from a Russian lobby group saying the world’s No.3 gold producer nation grew output by 2% in 2015, overtaking No.2 Australia with 294 tonnes.
Gold investment demand through leading ETF proxy the SPDR Gold Trust (NYSEArca:GLD) meantime rose again Monday on the spike to $1200 per ounce, requiring 703 tonnes of bullion to back the product – its largest quantity since July 2015, but still have the amount needed for the GLD’s peak holdings of end-2012.
The US Dollar fell Tuesday to 3.5-month lows against the Euro, pulling the price of gold for German and French investors 1.4% below yesterday’s spike to July 2015 levels.