Morning Gold Fix: July 28
Commentary courtesy of www.fmxconnect.com
Yesterday’s activity was a kick in the face to dip
buyers like me. If you read yesterday’s post and just ignore the first
line, I was spot on. But I ignored the signs and made an assumption
that the pin risk was stronger than the bowling ball around Gold’s
neck. Time to go back to just assessing events and risks and leave the
prognostication to the tea leaf readers. On that note, take a look at
this technical report out yesterday from Citi on our embattled yellow
metal. Full PDF here
Time to take a much more defensive stance on Gold
we remain constructive on Gold from a long-term perspective the
shorter-term price action is now very disappointing with a severe
correction lower looking a real danger.
•Equities are performing
well with bullish weekly reversals on 4 major U.S. indices last week
and break of supports on VIX yesterday.
•U.S. yields are finally
rising with possible double bottom forming on U.S. 30 year yields at
4.12%. A break would suggest 4.40-4.50% again and drag 10 year yields
through the pivotal 3.05-3.10% area. U.S. 2 year yields are also
starting to rise and drag USDJPY higher with 89.00 mow looking on the
•European sovereign spreads are falling sharply; German 2 and 10 year yields are rising as the curve flattens.
•EURCHF is bouncing strongly
•Industrial commodities (Copper and Crude in particular) are outperforming Gold in recent days.
looking like a very pro-risk dynamic could be developing and as this
has been happening Gold has not been able to follow through towards our
base of the 2 year channel around $1,176 is now under threat and a
close below (Weekly) would suggest a danger of extended losses. Weekly
divergence at the recent highs also supports this danger.
•A weekly close through the base of this channel could suggest extended losses towards $1,030-$1,045 again.
it be that we are entering a multi-month pro-risk environment where
people feel less need to hold Gold as a hedge as other assets look more
Gold monthly chart
Source: Aspen Graphics / Reuters 27 Jul’10