Gold fails to rebound from 3.5 month lows
San Francisco (May 28) Gold’s drop to levels not seen since early February still wasn’t enough to lure buyers back, as prices weakened further on Wednesday.
Gold for June delivery falling to $1,261.30 an ounce on the Comex division of the New York Mercantile Exchange and finding no rebound from its 2% retreat a day earlier. Prices are poised to settle at their lowest level since Feb. 6 July silver also dipped a cent to $19.055 an ounce.
The technicals are trumping the fundamentals for now,” said Mark O’Byrne, a director at Dublin-based GoldCore. Technically, in the very short term, “gold is vulnerable to a further fall to the double bottom” between $1,180 and $1,200 an ounce.
“Gold frequently sees weakness and bottoms on options expiration and given the still decent fundamentals including geopolitical risk, this could be the case again,” he said. Options on June gold expired on Tuesday.
Gold on Tuesday was hammered as traders seemed to react to perceived stability in Ukraine in the wake of last weekend’s decisive election result. The fact that investors are moving back into global equities lately isn’t helping, and there are also some technical headwinds in play.
But seeing as this is an historically weak time of year for gold, Dow Theory Letters editor Richard Russel says that the precious metal could get a seasonality boost.
“Gold has the tendency to decline in these months [May and June] while bottoming in July. If gold does not decline appreciably between now and July, I will consider it bullish for the metal,” Russel said.
Elsewhere in metals trading, July platinum fell $5.10, or 0.4%, to $1,457.20 an ounce, while June palladium gained $3.15, or 0.4%, to $833.80 an ounce. September palladium, which is now the most-active contract, tacked on $3.20, or 0.4%, to $834.75 an ounce.
High-grade copper for July delivery was roughly unchanged at $3.18 a pound.
Gold and silver miners saw their shares trade lower again on Wednesday. The Philadelphia Gold and Silver Index lost 1.2%.
Shares of the gold-backed SPDR Gold Trust exchange-traded fund fell 0.2%. Holdings in the ETF climbed by more than 8 metric tons — to 785.28 on Tuesday from 776.89 metric tons on Friday.
“This was a large purchase and it did not affect the price in the U.S. immediately, when normally purchases or sales over 4 tonnes impact heavily,” said Julian Phillips, founder of and contributor to GoldForecaster.com. “We were so surprised that we checked our figures and historic data to see if we had the figures wrong, but no, the purchase was heavy and real. So we wait to see market reactions to this price and to this buying.”
