Stronger U.S. Data and China Concerns Prompted Short-term Momentum Selling in Gold
After reaching $1,798.10 during Asian open on 5 October, the U.S. Comex
gold futures went to a low of $1,729.7 this Monday and ended at
$1,746.30 on Tuesday. Gold prices retreated 1.26 percent on Monday, the
largest percentage fall since 6 July this year. Gold price was down
0.76 percent this week after falling 1.18 percent last week while the
Dollar Index fell 0.33 percent after rising 0.42 percent last week. The
S&P 500 Index rebounded 1.84 percent after falling 2.21 percent
last week while the Euro Stoxx 50 Index shot up 3.19 percent this week
after being down 2.45 percent last week.
Several factors have weakened gold prices’ sentiment since Friday and
have triggered some momentum selling. The October U.S. consumer
confidence was higher than expected at 83.1, the highest level since
October 2007. The September advance retail sales went up 1.1 percent,
higher than expected. Industrial production in September also jumped a
higher than expected 0.4%. Stronger data from the U.S. could shorten
the time the Fed will buy mortgages on an open-ended basis, therefore
lowering the inflationary impact. In addition, a Mitt Romney
Presidential win would mean more cut in the U.S. government spending
which would hurt gold prices. On the eve of the release of the Q3
Chinese GDP report, investors appear worried that the government has not
done enough to stimulate the economy. China’s August gold import from
Hong Kong fell 29 percent to 54 tons from July, possibly due to a
slowing down of economic growth and a deceleration in the pace of
stocking up of gold by retailers and banks.
On the other hand, the demand for gold from traders and investors has
continued to jump. According to the CFTC data, gold traders’ net long
positions reached a 14-month high while the gold-backed ETF holdings
reached another record at 2,582.98 metric tons last Thursday. In
addition, the expectation that Spain could seek a bailout request
depressed the U.S. dollar and boosted gold price on Tuesday.
Gold price will likely take its cues from the Chinese Q3 GDP number to
be released on 17 October and the announcements from the 18 to 19
October EU Summit.
Austin Kiddle
Sharps Pixley, London
www.SharpsPixley.com
17 Oct 2012 | Categories: Gold
