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Gold Pressured by Bearish Fundamentals

By:
James Hyerczyk
Updated: Aug 25, 2015, 03:00 UTC

December Comex Gold is seeing limited action on Friday, but trading slightly higher. The market is set to finish the week sharply lower after reaching a

Gold Pressured by Bearish Fundamentals

December Comex Gold is seeing limited action on Friday, but trading slightly higher. The market is set to finish the week sharply lower after reaching a major 50% retracement level earlier in the week at $1255.60. The current chart formation suggests the market may return to at least $1219.40 over the near-term. Fundamentally, the selling pressure was generated by low inflation, a stronger U.S. Dollar and a much improved U.S. stock market.

GOLD BARS

December crude oil futures consolidated most of the week, but still finished lower on Friday and for the week. Overproduction and low demand continue to plague this market. According to the U.S. Energy Information Administration, crude oil inventories rose 7.1 million barrels for the week-ending October 17, 2014. Trader had priced in an increase of 2.8 million barrels.

Overproduction by the U.S., Russian and Saudi Arabia are the main concerns. The U.S. is producing a lot of oil because of improved drilling techniques, Russia is selling crude oil to raise cash because they have been shutout of the international banking community by the European sanctions, and Saudi Arabia is comfortable with $80.00 crude oil.

OPEC is not a concern either. Prices still have not gotten cheap enough to cause disarray amongst its members. They are still banding together, choosing to cut prices to Asia rather than production.

The EUR/USD is trading higher on Friday, but lower for the week. Traders sold the Euro this week after rumors swirled that the European Central Bank was considering buying corporate bonds as part of its stimulus plan. Although the ECB denied this news, traders still took protective action.

The GBP/USD is set to finish the week lower although it is trading higher on Friday.

The GBP/USD sold-off sharply earlier this week after the release of the latest minutes of the Bank of England. The minutes showed BOE members saw greater risks to the U.K. from a slump in the Euro Zone economy, damping investor bets on an increase in interest rates.

According to the minutes, two BOE policymakers voted to increase the official interest rate by 25 basis points and the remaining seven decided to leave rates unchanged. The minutes also highlighted growing pessimism about the global economy.

Also hurting the British Pound was a report showing retail sales fell more in September than traders forecast. The led to increased concerns the economy was faltering.

According to the Office for National Statistics, U.K. retail sales decreased 0.3 percent from August. Traders and analysts were looking for a 0.1% reduction. Trader believe the poor Euro Zone economy is partially to blame for the weakness.

Next week, the U.S. reports durable goods orders. The U.S. Federal Reserve is also scheduled to release its latest monetary policy statement on October 29. Euro Zone consumer inflation will be released on October 31. 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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