Gold Goes Cold Turkey as Chinese Stop Buying for Year of Rooster
Comment of the Day

January 27 2017

Commentary by Eoin Treacy

Gold Goes Cold Turkey as Chinese Stop Buying for Year of Rooster

This article by Eddie van der Walt and Susanne Barton for Bloomberg may be of interest to subscribers. Here is a section:

"The Chinese holiday can exaggerate some of the moves," Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. "We’re going to get lighter volume coming in. A lot of the focus is moving into risk assets."

Gold futures for April delivery fell 0.1 percent to $1,191.40 at 11:08 a.m. on the Comex in New York. Futures earlier fell as much as 0.8 percent, touching the lowest since Jan. 11. The four-day losing streak would be the longest since Nov. 14.

After touching a two-month high earlier this week, gold’s rally has withered as surging stock markets fueled investor appetite for risk. The Dow Jones Industrial Average climbed above 20,000 for the first time this week and the MSCI All- Country World Index is near a record.
The metal pared earlier losses Friday after a report showed U.S. economic growth slowed more than forecast last quarter on the biggest drag from trade in six years and more moderate consumer spending. Business investment picked up, which may be a harbinger for faster expansion in 2017.

“We expect full year Chinese demand to still fall short of levels seen in 2015,” Nell Agate, a Citigroup Inc. metals analyst, said by e-mail from London. “It’s possible that Chinese jewelry sales are likely to slow as the Chinese break for new year festivities.”

Eoin Treacy's view

Gold is at a pivotal juncture right now. Having unwound the majority of its overextension relative to the trend mean the questions now are how much of the short-term rally can be sustained, whether gold can successfully post a higher reaction low and subsequently hold a move above $1200 to confirm a return to demand dominance.

So far the reaction has been reasonably modest compared to pullbacks since July but this is a major test of the bullish case for gold and it is for the bulls to prove their case. A failure to find support soon would confirm resistance in the region of the trend mean and would open up potential for a further test of underlying trading and potentially the psychological $1000 area.

Platinum pulled back from the $1000 area this week and will need to sustain a move above that psychological level to confirm a return to demand dominance beyond the short term.

Silver has paused in the region of the six-month progression of lower rally highs and needs to sustain a move above $17.

The VanEck Vectors Gold Miners ETF is also trading in the region of its trend mean. 

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