The gold price has been hovering around the $1,400 an ounce level for the better part of a week, but on Thursday the metal fell back again.
By midday gold for delivery in December, the most active contract on the Comex in New York, was trading at $1,387 down 1.8% or $25 from Tuesday’s close as profit-takers sell into any gold strength that’s available.
Gold gained 5.7% in August and briefly reach a three-month intra-day high of $1,434 last Wednesday, but moving significantly higher appears impossible for now.
Gold has also rallied sharply from the intra-day low of $1,182.60 an ounce hit on June 28 which temporarily pulled the gold market out of bear territory, but that momentum seems to have been mostly lost.
The $1,400+ resistance level has proved insurmountable despite a number of factors working in gold’s favour (but, if it does not pan out as expected, would be bearish):
Standard Bank in a research note today makes a strong case that gold’s inability to form a new base above $1,400 is because Asian physical buying in Asia dries up when the price moves much above this level:
It is not just Asian consumers who wait for bargain basement prices.
After a brief hiatus in August, selling of gold-backed exchange traded funds (ETFs) has now recommenced with the world’s largest gold ETF, the SPDR Gold Trust, reporting outflows of 1.8 tonnes.
A good barometer of underlying gold demand – US sales of gold coins – have also fallen sharply.
Gold’s dramatic fall in April saw 209,500 ounces worth of American Eagle coins being picked up by bargain hunters.
By August this momentum had been completely halted. The United States Mint only managed to move a measly 11,500 ounces over the entire month.