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SHARPS PIXLEY A Pause in the Safe-Haven Buying of Gold?

The U.S. Comex gold futures fell 1 percent on Thursday, ending at $1,669.90. During the early Asian hours on Friday, the gold futures have dipped a further 0.2 percent. While the gold futures dropped 1.01 percent this week, the S&P 500 index and the Euro Stoxx 50 index rose 0.59 percent and 0.49 percent respectively. The Dollar index touched 80 again on Thursday while ending the day at 79.949. For the week, the Dollar Index actually fell 0.11 percent.

Gold Ran into Resistances
The gold futures shot up to a recent high of $1,697.80 on 17 January during New York hours, but are now trading 1.64 percent below that level. Several reasons are offered for the weakness. First, on 23 January, the U.S. House voted on suspending the debt ceiling until May. The Bill is expected to be passed by the Senate in late January, and approved by President Obama. Once the borrowing limit is raised, gold price will likely resume its climb due to further fiscal spending by the government. The rise in the December leading indicators in the U.S., and the higher January PMI data than the previous month in the Euro-area, China and the U.S. lead to expectations of stronger growth and higher real interest rates, therefore hampering gold pries. On Thursday, gold also fell in response to the lower U.S. initial jobless claims, which fell by 5,000 to 330,000. The gold market has been sensitive to any news suggesting an earlier-than-expected end to the Fed’s quantitative easing.

Some traders believed that gold price fell because speculators liquidated their long positions when they saw that gold price could not break $1,700. The CFTC gold net non-commercial combined positions, as reported by Bloomberg, are still about 48 percent lower than the latest peak reached on 2 August, 2011, indicating the positions are not that crowded.

What We are Watching Next Week
Important data to watch will include the U.S. durable goods orders on 28 January, the U.S. FOMC interest rate decision and the U.S. preliminary Q4 GDP estimate on 30 January, Germany’s January unemployment change on 31 January, and the Euro-17 January unemployment rate and the January U.S. non-farm payrolls on 1 February.

Kelly Smith
Sharps Pixley, London

25 Jan 2013 | Categories: Gold

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