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Technical Traders Try and Push Gold Back Through $1,000

Commodities / Gold & Silver 2009 Sep 09, 2009 - 10:08 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD rose above $1,000 an ounce as the start of US dealing drew near on Wednesday, only to fall back for the third time in two days.

Government gilt and bund prices fell as European stock-markets rose for the fourth session running. US crude oil futures added further to Tuesday's 4.5% jump.


Rising earlier from Tuesday's low at $993.25, the Gold Price mapped out a gently lower trend from yesterday's 18-month high at $1,007.45.

"Last week we became bullish Gold on the break of the top of [the summer's] consolidation triangle at 965," says today's chart analysis from London market-makers Scotia Mocatta.

"Suggest raising stop-loss orders on long positions to 990."

"The yellow metal needs a firm close above $1,000 to encourage fresh longs to the market," reckons another dealer in its technical analysis.

"The massive acceleration higher by spot gold has seen the market chart new highs for the year," says Commerzbank in its weekly note. Drawing a line from gold's Jan. 1980 spike of $850 to last year's top of $1,032, gold is "headed towards the top of the 38-YEAR channel at $1055," claims the technical note.

On the data front Wednesday, Germany reported a small 0.2% rise in consumer prices for Aug. from July, but a retail-sector survey in the UK reported a drop in High Street prices. The UK also announced a worse-than-expected trade deficit of £2.5 billion ($4bn) for July.

The Pound and Euro both rose vs. the Dollar, meantime, hitting a two-week high of $1.655 and a new 2009 high of $1.4560 respectively.

That capped the Gold Price in Sterling near £600 an ounce – up 7.5% from this time last month.

Eurozone investors wanting to Buy Gold saw the price slip to a one-week low of €685, eight per cent higher from the start of this year.

"The stability in the Gold Price over the long term is testament to the diversity of gold's demand base," according to a press release from World Gold Council chief Aram Shishmanian. "This insulates the price from movements in any single category or country...a luxury many other assets, more closely linked to industrial output or consumer spending, do not enjoy."

Over on the supply-side of the gold market, meantime, world No.1 Gold Mining group Barrick Gold declared "an increasingly positive outlook on the Gold Price" and said it will spend $5.6 billion this quarter on closing its hedge-book of forward sales.

First begun in 1988 – when gold averaged $400 an ounce – Barrick's forward sales were designed to lock in prices during the metal's long two-decade bear market. During the bull run starting in 2001, however, meeting those sales with new gold-from-the-ground has dented Barrick's earnings and stock performance.

"You can see a surge in gold all over the world coming out of the ground, which would just be overwhelming and very quickly bring the gold price crashing down," reckons small Australian miner Focus Minerals' director Campbell Baird, speaking to Reuters.

Today UK-energy giant BG Group announced a two-billion-barrel oil find in Brazil, "dwarfing" the huge find reported by BP last week.

The last large gold discovery, in contrast, was made in 2007. A decade ago, Gold Mining firms worldwide reported 15 finds of two million ounces and more.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2009

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

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