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Gold Stuck Between Resistance & Support

By:
Barry Norman
Updated: Nov 11, 2015, 05:48 UTC

Gold remains under the $1100 resistance level, which just a weeks ago was its support level. In mid-October gold was holding steady just below its

Gold Stuck Between Resistance & Support

Gold Stuck Between Resistance & Support
Gold Stuck Between Resistance & Support
Gold remains under the $1100 resistance level, which just a weeks ago was its support level. In mid-October gold was holding steady just below its resistance level at $1140 until the Federal Reserve October statement changed language and indicated that the Fed was seriously considering its first rate increase since 2006 and pointed to its December meeting as the likely starting point. Gold reversed course and has continued to decline. Later in the month as Janet Yellen testified before US lawmakers she was direct and just about assured lawmakers that the FOMC would increase rates in December. Gold has been trying to hold five-year lows since the summer as investors anticipate the Fed’s first hike since mid-2006. Low inflation and a strong dollar have also weighed on sentiment.

Gold prices have tumbled in recent weeks after Federal Reserve officials reiterated that a shift to higher interest rates remains a viable policy option this year, spurning investor hopes for a delay. Gold is expected to struggle once rates climb, as the precious metal doesn’t pay interest and costs money to hold. The policy shift is also likely to boost the dollar and make dollar-denominated gold futures more expensive for buyers who use other currencies to fund their purchases.

Gold traders are also watching for news out of the Fed regarding a potential increase in U.S. interest rates. Fed Chairwoman Janet Yellen is due to speak on Thursday at a conference on monetary policy, with traders hoping to glean fresh insight on the likely path of U.S. monetary policy.

Gold bounced #2.20 to trade at 1090.70 in the Asian session but is expected to give back gains through the trading day. Silver took its cues from gold and trades at 14.445 while platinum is trading at the bottom of its range at 906.35.

gold

Yesterday gold futures received a boost on the back of soft consumer inflation report from China. Annual consumer prices were reported to have risen 1.3% in October, while missing the median forecast by analysts pointing to a 1.5% increase. It has been the slowest annual rate of increase in prices since May, when the Consumer Price Index went up 1.2%. In September annualized consumer inflation in the world’s second largest economy was 1.6%. At the same time, annual producer prices in the country dropped for a 44th consecutive month in October, going down 5.9%, according to data by the National Bureau of Statistics of China. It matched the rate of decline reported in August and September, while market expectations pointed to a lesser slump in October.

china-inflation-rate-mom

In other metals copper was able to take a bit of an advantage as the US dollar eased. Copper gained 2 points bouncing off of seasonal lows and is trading at 2.221 ahead of a rash of domestic Chinese data due shortly.  Data released overnight from China suggested October’s headline inflation stood at 1.3%, below market forecasts of 1.5%, and 1.6% recorded in September, indicating a slowdown in consumer demand. Base metals felt the heat, as the three-month copper delivery futures contract was down 1.2% to $4,914.50 per metric tonne in late afternoon trading on the London Metal Exchange, trading near levels last recorded in 2009.

Additionally, primary aluminum was down 2.4%, lead was down 2.0% and zinc declined 3.9% futures also traded lower. Liz Grant, senior account executive at Sucden Financial, said, “LME prices came under pressure from Chinese data from the word go and continued to head south through the session. Meanwhile, the dollar maintained a steady tone which weighed on metals.”

copper

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