| 02 Nov 2010 | 1st resistance | 2nd resistance | 3rd resistance |
| Today’s resistance US$ | 1362 | 1372 | 1379 |
| | 1st support | 2nd support | 3rd support |
| Today’s support US$ | 1346 | 1339 | 1330 |
| Today’s pivot point US$ | 1356 | | |
The Day’s Story:
Spot gold ended marginally down on Monday due to mild profit taking as investors positioned themselves ahead of today’s U.S midterm election and tomorrow’s FOMC meeting statement in which details of fresh round of QE will be released. Gold also gave away its earlier gains as dollar regained some of its lost ground later in the session. Gold prices were supported earlier due to comments from China officials that inflation is on the way up in emerging markets and commodity prices will remain high in coming months. Chinese officials also said crude oil and gold are becoming de facto currency reserves for some countries. Spot gold is up by 25% this year and has outperformed stocks, bonds and currencies and looks set to record its 10th annual gain.
Major U.S indices ended flat after a choppy trading session on Monday indicating market was waiting for outcome of some of the biggest events in U.S this week and traders did not want to commit themselves prior to U.S congressional election results and details of exact amount of fresh stimulus package by FED. After soaring more than 100 points earlier in the session, the Dow Jones industrial average ended just 6 points higher. The S&P 500 finished up 1 point, and the NASDAQ fell 3 points. U.S stocks rallied earlier due to some encouraging U.S manufacturing data as Institute for Supply Management's manufacturing index jumped to 56.9 in October from 54.4 in September beating analysts’ expectations. Any reading above 50 indicates growth in the sector. Earlier gains were erased as traders turned their focus back to upcoming events. European stocks finished with minor gains as investors there also eagerly await the outcome of events in U.S. Gold which has been tracking stocks for last few months was also affected and gave away its earlier gains.
Analysts’ are concerned about amount of money to be employed by FED in an effort to help sustain economic recovery as it could disappoint investors who have already gone on buying spree in anticipation of Trillions of dollars of fresh round of monetary easing. Last week report in Wall street Journal however, contradicted market perception and revealed that FED may employ much smaller QE2 measures stretched over several months. In such a scenario we may see gold to give away some of its recent gains as much of QE2 is already
factored in the price according some market analysts although Bullion’s outlook remains bullish due to certain
factors. One of the main concerns will be heightened inflation caused by new money.
U.S dollar recovered from its earlier losses and ended marginally higher against basket of six major currencies. Dollar late advances limit any upside in gold prices as a result of their inverse correlation which is close to its highest level in a year. Dollar which has been the victim of fresh talks of new Quantitative Easing measures has lost almost 10% in last 3 months. If QE2 disappoints the market that could support the greenback as a result and trigger further correction in Gold prices. Having said that, gold remains fundamentally and technically weaker and that remains an underlying bullish factor for gold prices.
Gold price started its first session of the week on a high note and peaked to its intraday high of $1365.5 an ounce in early hours of Asian session. Gold however, quickly gave away those gains but crawled back above in a seesaw price action during late Asian trading hours. Gold price traded in a narrow range during early European session but gradually started to make its way towards south just before markets in U.S started their trading day. Gold came under severe selling pressure during U.S market hours and fell deep into red to its intraday low of $1349 an ounce by mid U.S session. Gold however, pared some of its losses and finished its day at $1353.7 an ounce.
Other Metals:
Silver futures for December delivery closed down 1.0 cent to $24.55 an ounce on Monday.
Platinum futures for January delivery rose by $4.40 to $1,711.50 an ounce on NYMEX.
Palladium futures for December delivery rose by $3.60 to $648.70 an ounce.
December N.Y. Copper closed up 5 cent $3.79 a pound on Monday.
Gold (News and Views):
December Comex gold closed down $7.00 at $1,350.60 an ounce on Monday. The London P.M. gold fixing was $1,346.75 on Monday compared to its previous P.M fixing $1,333.50. The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings fell to 1293.101 tons on October 28 down from 1298.166. The dollar index, which measures the U.S. currency against a basket of six major currencies, rose 0.10 to 77.24 on Monday. Crude Oil for October delivery rose by $1.50 to settle at $82.95 on Monday on New York Mercantile Exchange. Gold hit its true peak on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation in 1980 dollars, that translates to an all-time record of $2,184.08 an ounce, in 2010 dollars. Analysts with Barclays Capital say there was a moderation in the aggressive buying of gold and silver exchange-traded products during October. The global gold ETFs tracked by Barclays posted a net outflow of 4.8 metric tons during October, compared to a net inflow of 19.8 tons in September. Silver ETFs posted a net inflow of 389 metric tons in October, although this was down from 702 in September, Barclays says.
Factors Affecting Gold Price Yesterday:
A combination of factors is supporting Comex gold and silver so far, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. A number of observers have cited weakness in the dollar. Also, metals are benefitting from new exchange-traded funds, including one from ETF Securities that holds gold, silver and platinum group metals in the same ETF, as well as silver ETF from Sprott Asset Management, Gero says. He also cites “election anxiety” plus some of the recent news reports about terrorism attempts.
The turnaround in the dollar triggered some selling in the gold market,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “It’s going to be choppy trading ahead of the Fed,” said Zeman. While prices dips are possible, “big swings” are unlikely as investors are not expected to significantly rework their portfolios on the eve of the Fed meeting, he added.
People would be crazy to short the market, but a lot of the Fed’s easing is already priced in,” Zeman said. “So if you’ve been long gold, you’ve got to be leery at these high prices.”
"The Diwali religious festival takes place in India on Friday, and physical demand for gold should remain high in the run-up to this holiday," said Commerzbank in a note.
"Sentiment is cautiously bullish before the Fed meeting but I think people are still talking about the price target of $1400," said a bullion dealer in Hong Kong.
Gold Future Outlook:
Any disappointment in quantitative easing from the Federal Open Market Committee this week could boost the dollar, say Barclays Capital analysts. This tends to hurt gold. However, a Republican majority in the House of Representatives and reduced Democratic majority in the Senate may be supportive, Barclays says. This would result in split power that could mean difficulties passing any economic-stimulus measures and thus continued reliance on unconventional monetary policy easing. “This could offset the earlier short-term factors and continue to weigh on USD (the U.S. dollar) over the longer term,” Barclays says. “Barring any significant deterioration in euro-zone prospects, this would be supportive for gold prices.”
Long-term worries about inflation are supportive and could limit any pullbacks in precious metals, says Morgan Stanley. Precious metals rose last week despite a modestly stronger dollar as investors positioned themselves ahead of this weeks’ FOMC meeting, Morgan says. “While the decision on further monetary easing has the potential to disappoint given the strong market performance over the past several weeks, we think the longer-term threat of uncertainty and inflation could limit price declines relative to broader markets should (quantitative easing) disappoint,” Morgan says.
The two main news events of the next few days, Tuesday’s election and Wednesday’s FOMC meeting, have
the potential to contain some of the bullish enthusiasm behind the August-October rally and leave the October high of $1,388.10 as resistance for December gold, says MF Global analyst Tom Pawlicki. Pawlicki also cites some opposing factors that are supportive, including fresh worries over debt and austerity in Ireland and Portugal, the approaching end of the Indian festival season, and ongoing low opportunity costs of holding gold. As for the Fed meeting, Pawlicki suggests any quantitative easing may be smaller than expected, especially since some Fed members have spoken against this. “It would appear that the bond market has already discounted a (quantitative-easing) package that is smaller than anticipated, but that gold prices have not,” he says. As for the elections, a strong showing by Republicans could leave them “energized to cut spending.” Gold has benefitted since 2001 in part because of weakness in the dollar encouraged by deficit spending, Pawlicki points out.
“With interest rates at basically zero and the Fed willing to put more money into the system, money has to go somewhere, and it’s going into gold,” said Kaplan. “Gold is in a bubble, but that doesn’t mean it doesn’t get to $2,000 first.”
Technical Analysis (by Jim Wyckoff):
Technically, December Comex gold futures prices closed nearer the session low Monday after hitting a fresh two-week high early on. Bulls still have some upside technical momentum after producing a bullish weekly high close last Monday. Bulls also still have the overall near-term and longer-term technical advantage.
Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at the all-time record high of $1,388.10, scored in mid-October.
Bears' next near-term downside price objective is closing prices below solid technical support at $1,315.60. First resistance is seen at Monday's high of $1,366.40 and then at $1,372.00.
Support is seen at Monday's low of $1,349.10 and then at $1,340.00.
Wyckoff's Market Rating: 7.0.
Daily Gold and Silver Expected Range:
Gold: US$1338- $1371
Silver: US$24.25 - $25.10
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