More Banks Bearish on Gold as Price Flatlines in “Spinning Top” Pattern

WHOLESALE PRICES to buy gold held around $1580 per ounce on Thursday morning, trading in a tightening range as Asian and European stock markets crept higher after the Dow stock average recorded another all-time high in New York last night.

The Euro and Sterling both rallied this morning against the Dollar after the ECB and Bank of England both left their key interest rates unchanged.

Silver ticked back below $29.00 per ounce as the broader commodity markets also held flat.

“Gold has flatlined for the last 4 sessions,” says Wednesday night’s note from bullion bank Scotia Mocatta, “trading in very narrow ranges with very little difference between the open and close.

“This is referred to as a spinning top in candlesticks.”

“Gold continues to drift within a $1570-85 range,” agrees Moudi Raad at Swiss refinery and finance group MKS.

“On one side we have long term investor liquidation capping the market…while on the other side regional Asian demand continues to support.”

Still holding his hedge fund’s large position in gold-backed ETF trusts, mining shares and bullion derivatives, John Paulson last month posted an 18% decline in his $900 million Gold Fund reports Bloomberg News, quoting a letter to clients.

The fund has now lost 26% so far in 2013. The gold price is down 5.5%.

“For the first time since 2008,” says a new average forecast of $1600 in 2013 from Japanese bank Nomura, “the investment environment for gold is deteriorating.

“Economic recovery, rising interest rates and still benign Western inflation (for now) will likely leave some investors rethinking their cumulative $240bn investment in gold over the past four years.”

Cutting its 2013 average price forecast today to $1530, Australia’s Macquarie Bank says “Without a compelling new driver, weaker investment demand for gold is likely to continue on reduced tail risks, low inflation, and a lower prospect of more QE.”

The Bank of England today failed to expand its Quantitative Easing program, surprising analysts and leaving its purchases of government gilts at £375 billion.

It also left its key interest rate at 0.5%, four years after first taking it to that new all-time low.

“The steep fall in Sterling seen in recent weeks may have made the BoE more cautious,” reckons James Knightley at ING.

Prices to buy gold for UK savers fell as Sterling rose back above $1.50 on the news, dropping 0.5% to £1051.60 per ounce on BullionVault‘s live online market.

“I can’t stop thinking that gold is still a good buy here, even though it is losing momentum,” says one London bullion-bank dealer in a note.

“Loose monetary policies are still on, sovereign debts issue are still on, the debasement of currency is the easiest and only way out.”

Ahead of Friday’s much-anticipated US jobless data, new figures today showed a sharp rise in the number of planned lay-offs, rising to a 3-month high of 55,000 in February.

Adrian Ash
BullionVault

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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

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