Gold & Silver Reverse Last Week's Gains, "Slip Below"18-Month Trendline
Commodities / Gold and Silver 2011 Jan 05, 2011 - 10:51 AM GMTBy: Adrian_Ash
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.
By Adrian Ash
BullionVault.com
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Formerly 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.
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