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Gold Price Sinks Then Rebounds in Asian Trade, 'Textbook Reversal' Sees Chinese Premium Reaches $5 Per Ounce

Tuesday, March 3, 2015 6:45

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Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…

GOLD PRICES recovered a swift plunge near 2015 lows early Tuesday, quickly rallying back to $1210 per ounce in what one trader called a “textbook reversal”.

“Gold initially ticked higher in Asia,” said the note from Swiss refiner and finance group MKS’s dealing desk, “but came under pressure as China opened.”

Falling as low as $1195 per ounce – just above the 7-week lows hit in late February – gold prices then regained that 1.3% drop by the start of London business.

After the People’s Bank of China cut its key interest rates Monday, the Shanghai Gold Exchange again saw strong volume in its main domestic contract today, plus new record trading in the .9999 purity gold contract launched for international banks to trade last autumn.

Chinese premiums over London quotes – the key incentive for wholesale imports – ended the day at new 2015 highs above $5 per ounce.

Silver tracked the plunge and rally in the gold price, briefly touching the 2015 low seen in late-February at $16.10 per ounce.

“The pullback [in gold prices] was again supported by the pivotal support” below $1200 per ounce, says a technical note from Swiss bank and bullion market maker UBS.

“We would see a close above $1220…as crucial for the yellow metal to keep negative sentiment at bay.”

But gold prices are “consistently testing support” below $1200, says Singapore brokerage Phillip Futures.

“Such a strong support level, when broken, often results in a swift decline. We suspect that all gold requires now is a valid catalyst to significantly breach.”

Friday brings official US jobs data with the Non-Farm Payrolls report.

Thursday brings interest-rate and QE decisions from both the Bank of England and Eurozone central bank.

“Financial conditions are very accommodative globally,” notes the Reserve Bank of Australia overnight, surprising analysts by holdings its key rate unchanged at 2.25% despite what the RBA called “below-trend” economic growth turning “quite weak overall.”

Crude oil rallied above $60 per barrel of Brent on Tuesday, while major government bonds slipped but northern Eurozone debt continued to offer sub-zero yields.

Monday saw shareholdings in the giant SPDR Gold Trust (NYSEArca:GLD) shrink at the fastest pace since mid-December, forcing the trust to shed 1% of the metal needed to back its shares to 763.5 tonnes – still 8.5% above January’s new 6-year low.

Silver bullion needed to back the iShares Silver Trust (NYSEArca:SLV) grew in contrast, adding 0.1% to an 8-week high of 10,143 tonnes.

However, the SLV’s holdings remain some 7% below November’s 3.5-year high, reached when silver prices sank to new 5-year lows.

China’s largest bank, ICBC, meantime stressed its readiness for the new London gold price benchmark – the LBMA Gold Price – due to replace the century-old Fixing on March 20th, according to China Daily.

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Source: https://www.bullionvault.com/gold-news/gold-price-030320152

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