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LAWRIE WILLIAMS: Gold breaches $1,300 but immediately knocked back down

Over the past week the gold market has been speculating as to whether the $1,300 psychological barrier would be breached – and if so what would happen to it thereafter.  Most speculation from the pro-gold advocates suggested that the price would soar once the $1,300 level was breached, but in the event the opposite occurred with a very rapid $15 fall.

Once trading in New York opened on Friday, a declining dollar and weak equities markets saw gold quickly break through $1,300 and it seemed set go substantially higher.  But was it allowed to do so (I use the term allowed advisedly)? Huge paper gold trading volumes at what would normally be a quiet time of year during the holiday season saw the gold price brought down to earth with a bang and it ended the week back a little below where the markets had opened on Friday morning.

The pro-gold faction immediately cried ‘foul’ and one has to say they may well have a point.  The volumes traded suggested yet another gold take-down by the big money which appears to have an interest in keeping the gold price down as a high gold price suggests a weak dollar and perhaps a weak U.S. economy, which the powers that be seem to want to cover up.  One commentator who highlighted this opinion was Ed Steer, who runs a right wing oriented precious metals newsletter (www.edsteergoldandsilver.com), but regardless picks up on some of the market anomalies perpetrated even under the current U.S. Administration, which many would see as of being of the political right.  Ed, who had been about to take a 2 week holiday, felt compelled to add an additional daily comment thus: The gold price traded pretty flat until a minute or so before the London open.  At that point, the dollar index took a bit of dive -- and the gold price jumped up five bucks before being brutally capped on enormous volume.  It inched higher from there until shortly after the COMEX open -- and then quickly jumped up another five buck -- and above $1,300 spot.  That was all 'da boyz' had to see -- and they went to work.  By the time they were done, they'd actually closed gold down on the day.”

Now whether Ed is right or not on his opinions on gold price control by certain vested interests which are, to say the least, controversial, the recent pricing anomalies are indeed there for all to see.  I have written on this before – the knockdowns whenever the gold price seems to be breaking out of a positive pattern have been intense and very sharp indeed with huge paper gold sales volumes over extremely short periods of time – see my Tubthumping gold posts on this site (click here for the most recent of these).  The evidence that there are certain players of the futures markets having perhaps an undue influence on the metal price is hard to overlook.  Indeed some of the mainstream commentators, who in the past have poured scorn on the possible manipulation of the gold market, are beginning to note some of these price movement anomalies and are beginning to point fingers.

Be all this as it may, the volume of trade on the futures markets on Friday was ridiculously high.  Ed Steer commented “Net volume was beyond Mars at just under 380,000 contracts.”  Some of it indeed could be down to high frequency algorithms set to implement sales at the $1,300 level, but these would have just exacerbated the fall.

So where does gold go next?  If one looks at the www.kitco.com price charts for Friday, the fall seems to have hit downside resistance at around the $1,285 level and this could prove to be a temporary bottom.  If so gold could take another run at the $1,300 level this week as last week’s figures are digested by the markets.  If so, we see any further breach of $1,300 as being a little firmer and gold moving up to the $1,320s.  But the U.S. Labor Day holiday (September 4th) is rapidly approaching and this could well provide an inflection point for gold (major U.S. holidays do seem to frequently have a strong impact, but this could be upwards or downwards.  Equities markets are looking nervous and more and more commentators seem to be predicting a market crash as they see current equity price levels as unsustainable.  The period after Labor Day could see equities crashing and gold soaring – or vice versa.  It may not be a good date for one sector of the investment community – but which.  In Roman times it may have been ‘beware the ides of March’.  Perhaps the modern equivalent is ‘Beware the U.S. holiday’!

20 Aug 2017 | Categories: Gold

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