GOLD PRICES escaped the worst of a fresh slump to new multi-year lows in other commodities Tuesday, whipping between $1070 and $1080 per ounce as weak Chinese trade data and the cancellation of major miner Anglo American’s dividend to shareholders saw world stock markets drop up to 2.5%.
European crude oil’s benchmark Brent contract hit 7-year lows beneath $40 per barrel.
Silver failed to rally with gold prices from an earlier low, retreating to $14.10 per ounce – the level from where it jumped to near 4-week highs above $14.60 starting Friday.
“Large divergence” in the gold price’s relative strength index of recent daily moves “points to a loss of downside momentum,” says the latest Bullion Technicals Weekly from German bank Commerzbank’s analyst Karen Jones.
“[That] implies a corrective rebound near term.”
Looking gold’s drop and rally from fresh 6-year lows last week at $1046 per ounce, “We think that some professionals have been caught short
,” adds one Asian trading desk, “and would expect there to be a bit more topside pain to come.
“A test of $1100…will be critical going into the end of the year.”
Last Friday’s jump was “a very large short covering rally
,” agrees David Govett at brokerage Marex Spectron in London, calling the squeeze “long overdue [to get] rid of a lot of the stale and weaker shorts in the market.
“Unfortunately it also prompted some buying by those excited by the rally…There is still no good reason to be long of precious metals.”
Trading volume in Shanghai’s main gold contract almost halved today from Monday’s 4-month high as Yuan prices gave back half of yesterday’s 5.6% jump.
Compared with London quotes however, Shanghai gold rose to a $3.70 per ounce premium, incentivizing new imports from the world’s central wholesale hub.
China’s gold bullion imports are not clearly shown by its official world trade data.