- Gold was holding near a 7-1/2-month high on Wednesday as risk aversion sent investors to the safe-haven asset amid a tumble in global stock markets and concerns over the global economy.
Bullion has recently rallied along with other safe-haven assets such as the Japanese yen and U.S. Treasuries.
Equity markets were hit hard early in the week by worries about the health of the euro zone banking sector, with a very easy monetary policy seen crimping bank profits and consequently their ability to repay debt.
Asian stocks dipped early on Wednesday amid banking sector concerns, while European shares plunged for a second straight day on Tuesday.
The dollar nursed losses around 3-1/2-month lows on Wednesday, pressured by the spectre of a global economic slowdown as European banks struggled to fend off growing doubts over their health and as oil prices slipped back.
- SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.21 percent to 702.03 tonnes on Tuesday.
- Sean Lusk, director of commercial hedging at Walsh Trading, said that he sees potential for gold to hit his target at $1,228 an ounce in the near-term. He noted that Monday’s move was accompanied by higher open interest and higher volume. “It appears that nobody is worried about buying at higher prices today,” he said.
But the market is not without its risks. Lusk said that Fed Chair Janet Yellen will be testifying before Congress Wednesday and Thursday, which represents significant risk for the market.
“If [Yellen] comes out and is clearly dovish, I think equity markets could stabilize and that could deflate this gold rally,” he said. “If her statement is unclear then I think more money will pour into gold.”
- Gold prices ended the U.S. day session near steady Tuesday, on some mild profit-taking pressure and some technical chart consolidation following Monday’s strong gains that pushed prices to an eight-month high just above $1,200.00. Sellers in safe-haven gold are still very timid, as world stock markets this week remain under selling pressure. April Comex gold was last down $0.50 at $1,197.40 an ounce. March Comex silver was last up $0.004 at $15.43 an ounce.
Technically, April gold futures prices closed nearer the session high. Prices are in an accelerating seven-week-old uptrend and the bulls have technical momentum and the firm near-term technical advantage. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,232. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at this week’s low of 1,164.50. First resistance is seen at this week’s high of $1,201.40 and then at $1,208.00. First support is seen at today’s low of $1,185.90 and then at $1,175.00. Wyckoff’s Market Rating: 7.0
- Asia was quiet with the absence of China, but HK will return tomorrow which should inject more liquidity into the timezone.
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