Gold Marketwatch – 28/4/2009
Posted April 29, 2009on:
Market Commentary – 28/4/2009
Gold opened at 911.00/913.00 in New York. The metal came under pressure as the session began slipping to an intraday low of 903.75/905.75. It recovered and briefly spiked to a high of 913.00/915.00 as the Comex was evacuated on news of low flying passenger plane being followed by a US fighter over Manhattan. However it was later reported to be a military exercise and the metal quickly retreated, finding support near 907.00. It traded lightly for the remainder of the day, finally settling at 906.00/908.00.
Gold broke back down below our key technical pivot at 900 triggering stop losses. The unit currently sits at 891. We must respect the channel top of Gold which came in at 918 on Friday and stopped the unit in its tracks. That line comes in today at 914 (drawn off 1006, 966, 918). The break back below 900 has cancelled the double bottom call for 934. We are neutral with first major support seen at 866 multi April lows.
Gold prices have been consolidating following the rally to
$1,006/oz in February, but despite some bullish developments,
prices have not managed to find upward momentum.
- Investors added a further 118 tonnes to the Gold ETFs in March,
but we note daily additions have now started to slow.
- Quantitative easing should boost investment demand for Gold over
the medium term, but a relief rally in equities in the short term,
may prompt a reduction in safe haven buying of Gold.
- Prices may dip further in the short term, but expect dips to attract
good scale down buying.
Silver has mirrored the performance in Gold, but if anything is
finding more support as industrial metals are in demand.
- Investors continue to buy into the Silver ETFs, but the rate of
accumulation has slowed. The net fund long position has also
slipped. Both these need close monitoring.
Gold continues to consolidate, but prices are testing support more frequently now.
Gold has had a choppy time in March with prices generally consolidating after the run up to $1,006/oz in February. In last month’s report we were looking for consolidation at lower numbers, targeting $895/oz to $882/oz as likely areas to look for support. As it turned out, prices fell to $891.50/oz, bounced and then dropped to $883.50/oz,before trading sideways either side of $920/oz. Given the extent of the ETF buying and the Fed’s embracement of quantitative easing, we are surprised prices did not rechallenge the February peak again.
The fact they have not done so, raises a warning flag that perhaps the rally has run its course, at least for a while. As such, we feel there is a danger of some stale long liquidation that could push prices down to test for support between $860/oz and $850/oz. Such moves may well be short- lived, indeed any dip will need to be short- lived if the market is to avoid even larger falls.
Summary – Overall we remain bullish, but would not be surprised to see a pullback first as some profit taking seems likely. Expect dips to be well supported.