Gold Finished Marginally Higher in Quiet Trading
| 26 Nov 2010 | 1st resistance | 2nd resistance | 3rd resistance |
| Today’s resistance US$ | 1377 | 1380 | 1385 |
| | 1st support | 2nd support | 3rd support |
| Today’s support US$ | 1370 | 1365 | 1362 |
| Today’s pivot point US$ | 1373 | | |
The Day’s Story:
Gold finished marginally higher in an extremely quiet trading session on Thursday due to Thanksgiving holiday in U.S. Gold was stuck between $1370 and 1374 for most of the session as volumes remained to their lowest levels. Gold price has been supported by military tensions in Korea and ongoing European debt saga this week due to its safe haven demand after two weeks of declines and is up by 1.3% on weekly charts. In absence of any significant economic data or other market moving news traders decided to stay on sidelines ahead of the weekend. Most of the traders will not be returning to work today as some markets remain closed so volume may be thin but some volatility may return to the market. Gold has enjoyed an unprecedented run this year so far and is up by 26% beating stocks, currencies and most commodities.
U.S markets were closed due to Thanksgiving holiday and no economic data was released as a result. Stocks in Europe also experienced a rather quiet day but ended with decent gains with FTSE 100 finishing 0.74% high. CAC40 finished its day with 0.34% gains and DAX30 surged 0.8%. Stocks rallied on Wednesday after a day of massive declines as European debt crisis remain in the backdrop despite an apparent solution to Irish debt crisis. Analysts’ remain wary over debt situation in Portugal, Spain and Italy and wonder which will be the next in line to seek help from IMF and European Union. Gold will remain supported by European debt contagion fears in coming weeks and months.
U.S. dollar index traded near steady levels on Thursday and finished a tad lower after hitting a fresh two-month high. Dollar rose initially against most of the major currencies but could not hold on to those gains and finished marginally lower to end its day. Dollar’s move was unable to trigger a response in gold for most of the session although late declines in greenback did help bullion to stabilize and finished on steady levels. Gold and Dollar move in opposite direction to each other due to their inverse correlation as dollar weakness enhances demand for dollar denominated assets as it makes them cheaper for holders of other currencies. Both however, can travel in the same direction at time of heightened economic uncertainty as was the case in first half of this year during Greece’s debt crisis. Similar trend has been seen during last few days as European debt
crisis resurfaced. Adding fuel to fire was escalating military tensions between two Korean neighbors helping to boost demand for both gold and greenback as safe haven destinations for investors to park their money in.
Traders will also look for China’s further measures to control inflation after last week’s rise in Reserve requirement for its banks. Some analysts had been expecting a hike in interest rates, which would have been more severe, and could still happen in the future. Any steps to fight inflation would weigh on gold prices as the metal is seen as protection against future inflation.
Gold price started its day with some losses on Thursday and fell to its intraday low level of $1367.8 an ounce early during Asian session. Gold stabilized after initial losses and pared its minor intraday losses during rest of Asian session but in extremely quiet trading. Gold was capped in a tight range throughout European session. As markets in U.S were off due to their holiday, bullion remained quiet but steady in final hours of the session. Gold finished its day with marginal gains at $1374.5 an ounce.
Other Metals:
Silver futures for December delivery closed up 1 cent to $27.54 an ounce on Thursday.
Platinum futures for January delivery fell $4.00 to $1,655.95 an ounce on NYMEX.
Palladium futures for December delivery rose by $0.73 to $695.23 an ounce.
N.Y. Copper for January delivery closed up 6 cent to $3.77 a pound on Wednesday.
Gold (News and Views):
December Comex gold closed up $1.00 at $1,374.00 an ounce on Thursday. The London P.M. gold fixing was $1,373.25 on Thursday compared to its previous P.M fixing $1,372.50. The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings rose by 3 tons to 1285.284 tons on November 22 down from 1289.336. The dollar index, which measures the U.S. currency against a basket of six major currencies, fell0.05 To 79.69 on Thursday. Crude Oil for December delivery was unchanged at $83.86 on Thursday 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. The net length of managed-money accounts fell from 229,543 lots for futures and options combined on Oct. 12 to 173,067 as of Nov. 16, the cut-off date for the most recent weekly data from the Commodity Trading Futures Commission. This was the first drop below 200,000 since August.Factors Affecting Gold Price Yesterday:
Gold was trading quietly during the entire day with the US being closed for Thanksgiving, hovering between $1370 and $1374, says a research note from MKS Finance. Concerns over Euro Zone debt issues were the main facts supporting gold today like in the previous sessions, MKS said. “The market was bound in a tight range between $1371.70 and $1374.50 in an extremely thin environment for the entire morning session.
Spreads had also widened considerably as a result across all metals,” it said. Adding support was the news that Vietnam’s Central Bank allowed gold imports into the country in an attempt to bring prices in line with those on the international gold market. MKS anticipates more action tomorrow and a fairly volatile market, “due to the fact that not all market players will be back.”
"It's been the quietest of days ... Gold seems to be consolidating generally and quite resilient," said Peter Hillyard, head of metals sales at ANZ Investment Bank, noting that the market was likely to be quiet until Monday.
"Investors still seem to be of the opinion in general that ... there's generally fear about global economies. There's generally a perception that there's not much you can trust to invest in other than commodities, and that's not just gold."
“Gold is giving back some of the flight-to-safety bid, “said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.“The Korean conflict hasn’t erupted into something bigger yet, and the euro has stabilized.”
"Gold is finding reasonable interest on the dips from investors who are worried about currency debasement, possible inflation at a later stage and we're seeing reasonable physical buying out of India because the wedding season is under way," said Robin Bhar, an analyst at Credit Agricole, who saw gold trading between $1,365-$1,375 in the next two days.
MF Global analyst Edward Meir says he sees some worrisome parallels between current conditions and spring, when European worries hurt a range of commodities, including base metals. In March/April, the U.S. economy was showing signs of perking up, only to be derailed in part by a debt crisis in Europe when problems emerged in Greece. “We seem to be going through the same pattern this time around, and although the crisis has yet to fully play out, some parallels are striking,” Meir says. There are record high yields in the debt market for the “problem countries,” he points out. “Also, just as we saw last spring, the European authorities seem to be sending mixed messages about what to do, although in Ireland's case, they made all the right moves only to be rebuffed, at least initially, by a reluctant borrower,” Meir says. Meanwhile, markets are keeping an eye on China and expectations for more tightening moves to ward off inflation. “All this does not bode well for commodity prices going into the year-end, and we would therefore be reluctant to go long here until a more meaningful correction sets in,” Meir concludes.
Gold Future Outlook:
SEB Commodity Research says its strategic and short-term tactical views on gold remain bullish. Analyst Filip Petersson lists a number of factors helping gold rise lately, including a run for safe-haven assets amid European debt worries and the Korean conflict. Markets have not reacted with relief toward efforts to bail out Ireland, with other nations’ bond yields rallying and the focus turning toward Portugal and Spain. Furthermore, Chinese inflation and a lack of inflation-protected investment alternatives could send Chinese retail investors into gold. “Our strategic gold-market view remains bullish,” SEB says. The tactical view is influenced by
rallying bonds of peripheral European nations and the Korean conflict. “The later is likely to blow over quickly, but the prior could get out of control if Spain heats up,” SEB says. “In that case, gold would rally in parallel with the dollar as Europeans rush for an alternative to the euro. Our tactical view remains bullish.”
Technical-chart analysts with Barclays Capital say gold is generally retaining a bid tone due to ongoing peripheral euro-area concerns. Referring to gold prices in dollar terms, they write in a research note: “Support is building over the 1,314/1,335 lows and whilst that remains the case, we look for a break above interim resistance at 1393/1404. Extension through the 1425 high would confirm a run at 1440.”
The Korean tension and the euro-zone problems will keep a floor under gold prices, so look for any selling to be shallow and brief," said Matt Zeman, head of trading at LaSalle Futures in Chicago
Technical analysis (by Scotia Mocatta):
Gold is unchanged today at current 1373. We see resistance overhead at 1388 the 61.8% Fibo and support at this week’s low of 1349. The market is nervous about Gold this week considering over the past two weeks we have seen the metal reach a fresh record high of 1424 before collapsing back to 1330. After 2 down weeks, is this a sell on rally, or buy on dip? We believe the risk is higher, with only a move below 1330 causing significant liquidation.
Daily Gold and Silver Expected Range:
Gold: US$1360- $1385
Silver: US$27.00 - $28.10
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