Gold Withstands Profit-Taking

October 19th, 2015 by

The last several weeks have been some of the best that the precious metals have seen since the very beginning of the year. There is little doubt that we’ve been in a prolonged down period for commodities in general amid years of monetary easing from central banks. As any tightening of monetary policy in the near future has gotten less and less likely, fortunes have somewhat reversed the precious metals even while other commodities, like oil and base metals, continue to trade sluggishly.

Spot gold opened this morning down a modest $1.40 per ounce (-0.12%), hanging around $1,176/oz before slipping a bit to $1,172/oz. There appears to be a new strong resistance level for gold around the $1,179-per-ounce mark. The yellow metal is still up over 3% during the last month of trading, so some profit-taking to begin the week was to be expected.

Silver was down 0.9% to about $15.90/oz. Platinum was flat near $1,015/oz, while palladium fell a bit farther than its peers, sinking $12 per ounce to $682/oz.

Going for Gold

The prospects for gold bullion started to reverse direction as two developments became clear at the end of September and beginning of October: 1) growth in the Chinese economy is expected to continue to slow, and 2) the Federal Reserve seems unwilling to raise interest rates until this development can be overcome or dealt with. Cracks in the never-failing defense that “the economy is improving” began to show, as even the various members of the FOMC are starting to split their opinions on whether or not it’s the right time to hike interest rates. Tightness in the bond market added fuel to the fire. Traders really began to switch to being bullish on gold after the metal recently broke back above its 200-day moving average, the first time it’s crossed above the 200-DMA since it did so briefly during May. Net long positions on gold surged to their highest levels since that period in mid-May.

Source: Bloomberg

Source: Bloomberg

LBMA Shakeup?

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The other big news affecting gold today is the revelation that the London Bullion Market Association (LBMA) and the London Metal Exchange (LME) are planning changes for how the largest metals trading market in the world operates. In cooperation with the World Gold Council and some of the major market-making banks in the business (Goldman Sachs, Morgan Stanley, Barclays, JPMorgan Chase), the group is exploring ways to run a precious metals clearinghouse with derivatives trading, which is how the COMEX handles its over-the-counter gold trading.

It is hoped that the discussed changes will bring greater transparency and efficiency to the London gold market. Many unofficial talks will follow, including a gathering of 600 industry insiders—from mining companies, banks, exchanges, retailers, and refiners—that meets in Vienna this week.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.