News Column

Bullion extends price decline

May 29, 2014

LONDON: Gold prices continued to fall yesterday after a technical breakout sent prices sliding more than 2 percent the previous day.

Gold posted its biggest daily fall since mid-December on Tuesday after strong US data helped send US and German stocks to record highs, with losses accelerating as prices broke out of the narrow range they had held in for more than a month.

The metal initially took some support from a softer tone to European stocks, but later fell to its weakest point since early February at $1 260.44. In London yesterday afternoon, gold was fixed at $1 263.50, down $12 from the second fix on Tuesday.

A technical break-out started the fall on Tuesday, "which then accelerated when US data surprised and US stocks hit new records", Saxo Bank's head of commodity strategy, Ole Hansen, said. Adding to this, he said, was weak data on China gold imports.

"All is not lost though," Hansen said, explaining that holdings in gold-backed exchange-traded products had jumped on Tuesday.

He said the $1 262.70 technical level was the key. "Any additional selling should run out of steam ahead of $1 245."

Gold buying in the price-sensitive Asian markets remained soft yesterday, traders said, with Chinese demand failing to pick up despite the sharp overnight drop in prices.

"We have had a $30 price drop and still no jump in Chinese premiums.

"That is not supportive," Victor Thianpiriya, an analyst at ANZ, said.

Prices for 99.99 percent purity gold on the Shanghai Gold Exchange were between $2 and $3 an ounce above global prices, little changed from Tuesday's premiums. The price differential between Chinese prices and global prices is considered a good measure of demand.

Trade data on Tuesday showed that China's imports of gold from main conduit Hong Kong fell to a 14-month low last month because importing banks were adequately stocked amid softer demand and a weaker yuan.

From a technical perspective, the metal remains vulnerable to further losses, according to analysts. - Reuters

Cape Argus

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Source: Cape Argus (South Africa)

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