By From Adrian Ash
“Slip Below”18-Month Trendline
BOTH SILVER and spot gold prices unwound what remained of last week’s gains in London trade on Wednesday, retreating to $29.36 and $1380 per ounce respectively amid what several analysts called continued “profit taking” following 2010’s strong rise.
World stock markets also fell, while crude oil and copper led a fresh 1.2% drop in the broad commodity markets.
The US Dollar knocked 1.5¢ off the Euro and 1¢ off Sterling, curbing the drop for Eurozone and UK investors looking to buy gold today.
“Spot gold remains medium-term bullish as long as the mid-October low at $1314.25 holds,” writes Commerzbank technical analyst Axel Rudolph in his weekly comment, pegging his “medium-term upside target…at $1500.
In silver bullion, “Our bullish short-term forecast will remain valid as long as silver trades above the three month uptrend line at $29.54.”
But “Looking at the bigger picture,” says a London dealer in a note, “gold closed [Tues night] below its trendline from July 2009, and [closed] below its 50-day moving average for the first time since August. The silver price [ended Tues] about 50 cents off its trendline from the same date.”
European stock markets meantime fell to their lowest level since the start of Dec. on Wednesday as major-economy government bond prices rose.
Ahead of a $1.5 billion purchase by the Federal Reserve – part of its $600bn “QE2” program of quantitative easing – that pushed 30-year US Treasury yields further below Dec.’s 8-month highs.
Minutes from the latest Fed meeting showed Tuesday that “some [policy-makers] had a fairly high threshold for making changes to the program.”
“I think there is a chance there will be QE3 and it is going to be because the unemployment rate is above 9%,” said former Fed policy strategist Vincent Reinhart to Bloomberg last week.
Today’s unofficial ADP Payrolls report showed almost three times as many new private-sector jobs being created in Dec. as analysts forecast.
Official US jobs data will be released Friday.
“We believe that gold will continue to attract safe-haven buying from risk-averse investors this year,” says HSBC’s head of metals analysis James Steel, “as European Union sovereign debt concerns persist.”
The US Fed’s QE program will likely continue believes Steel – quoted by the Platts news wire – but “the pace of economic activity in the emerging world will likely remain strong, igniting inflation fears.”
“Oil prices are entering a dangerous zone for the global economy,” said International Energy Agency chief economist Fatih Birol in a new report on Tuesday, announcing a “wake up call” for oil consumers and producers alike.
Chile meantime became the latest export nation to try and curb its own currency’s rise against the US Dollar, announcing $12 billion of forex market intervention for 2011.
Adrian Ash
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Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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