Gold Eases Slightly As 'Nervousness' In Other Markets Abates At Start Of New Week
Singapore (Oct 20) Gold futures have started the week modestly softer as some of the general nervousness in a broad range of markets last week lets up, at least in Sunday night electronic trading and the start of trading in the Asia-Pacific region.
As of 8:36 p.m. EDT Sunday, gold for December delivery was $3 lower to $1,236 an ounce on the Comex division of the New York Mercantile Exchange. December silver was down 5.6 cents to $17.275 an ounce.
The December S&P 500 futures were up 8.70 points to 1,889.70 in electronic screen trading, and the euro was down to $1.27555 from $1.27580 late Friday.
“It is a quiet open, just down a few dollars (in gold),” said Eamonn Sheridan, analyst with Forexlive.com. “A lot of the nervousness from last week is starting to dissipate a little…Of course, that’s going to be tested once Europe comes in and the week really gets under way.”
Equities may well remain one focus after a tumble and partial bounce-back during the latter part of last week, observers said. Also, market will be eyeing the U.S. dollar and inflation data this week, said Chris Weston, market strategist with IG.
“You’ve always got to look at the dollar,” he said. Gold could get a lift if the dollar index falls back below the 85 area, he said. The spot index was around 85.327.
“My best guess is people are going to be continuing to look favorably at the U.S. dollar,” he said. “We’ve seen a repricing in the (federal) funds rate….I think the dollar looks like a fairly good buy at these levels against a range of currencies. That should work as a headwind (for gold).”
As for inflation data, Germany’s producer price index is on the calendar for Monday, and U.S. consumer prices are on tap for Wednesday.
“Inflation has been low for most of the major economies, which is part of the reason why we’ve seen the equity sell-off,” Weston said.
Low inflation presumably means less buying of gold as an inflation hedge. However, in the case of the U.S., this has also pushed back expectations for when interest rates might rise, which is supportive for gold since it means less “opportunity cost” for holding the metal rather than a yielding asset and can also dent the U.S. dollar.
In fact, a trader pointed out that the most recent data from the U.S. Commodity Futures Trading Commission shows that there appeared to be fresh buying on ideas that slowing global economies will have an impact on the U.S. and potentially delay the anticipated start of Federal Reserve tightening next year. The CFTC data showed that money managers hiked their net-long, or bullish, position to 51,994 contracts for futures and options combined as of last Tuesday, compared to 37,275 the week before.
Yet another factor markets will be watching over the next week, Weston added, is the European Central Bank’s yearlong review of the financial health of banks in the eurozone.
“The market is at the moment is struggling to work out what exactly happens with gold from here, to be honest,” Weston said. “A lot of the short-term catalysts are conflicting with each other. Therefore, I would expect to see some fairly short-term consolidation.”
Sheridan put the nearby support for gold in the area around $1,233 an ounce, then $1,220. Weston listed the major level at $1,180, a triple-bottom on the charts going back to June 2013.
Sheridan put nearby resistance around $1,249 to $1,250 – roughly the five-week highs last week in both the futures and spot markets.
One key event for gold this week is Diwali, or the “festival of lights,” a Hindu festival in India that often leads to buying of gold as gifts. The holiday is Thursday. India, along with China, is one of the two largest gold-buying nations in the world.
As last week wound down, Barclays reported that physical demand in the Asian region has picked up, although not aggressively, since gold’s recent dip below $1,200 an ounce. With Diwali approaching, and ahead of the so-called wedding season, “we expect demand to improve, potentially offsetting macro headwinds in the near term,” Barclays said.
No major U.S. economic reports are on tap for Monday. The first one of the week will be existing-home sales on Tuesday.
Source: KitcoNews
