Comex Gold Eases On Profit-Taking As Equities Stem Recent Slide
New York (Aug 4) Gold futures eased Monday on profit-taking as equities showed signs of stabilization after sharp losses toward the end of last week, traders said.
As of the pit settlement, gold for December delivery lost $5.90 to $1,288.90 an ounce on the Comex division of the New York Mercantile Exchange. September silver lost 3.8 cents to $20.333 an ounce.
Sean Lusk, director of commercial hedging with Walsh Trading, blamed the pullback on the stock market’s ability to find its footing again. The Dow Jones Industrial Average was up a modest 19 points shortly after the pit close for gold futures, but at least was on track to end a four-session losing streak. Also, Lusk said, the dollar held up after falling sharply against the euro on Friday.
“There still seems to be for now a lack of conviction to the upside (in gold),” Lusk said. ”But we held the lows from last week….You didn’t have any push or follow-through (from Friday’s gains) overnight.”
While the market continues to keep tabs on geopolitical developments in the Middle East and Ukraine, there was not enough fresh news to fuel another round of safe-haven buying, Lusk continued.
“We drifted back a little bit, but we didn’t drift back much,” Lusk said. “Maybe there is a little profit-taking as the stock market hit its best levels, along with the dollar.”
Another trader said one of the factors underpinning equities was overnight news that the Bank of Portugal unveiled a rescue plan for Banco Espirito Santo.
A New York desk trader described the pullback in gold as a correction to a “knee-jerk reaction” higher on Friday after the monthly U.S. employment report.
December gold finished with a $12 gain Friday when the Labor Department said nonfarm payrolls rose 209,000, slightly less than expectations for around 230,000. Additionally, the jobless rate edged up to 6.2% from 6.1% as more Americans declared themselves part of the labor force, plus average hourly wages were largely flat, rising just a penny.
“We broke through some trendlines on Friday. We are seeing some profit-taking,” the trader said. “It’s been extraordinarily quiet here.”
Triland Metals said the yellow metal is well-supported at a 61.8% Fibonacci retracement level around $1,281, which so happens to be around last week’s lows.
“Sub-$1,300 physical buying is likely to be amplified by this technical significance,” Triland said. “Such has been the case for a long time now. Gold continues to gravitate back to $1,300; this consolidation represents a market that is swayed by conflicting fundamental conclusions. On one side, many see bullish stocks and a higher interest-rate environment as a reason to seek out higher-yielding alternatives to gold. But many gold bugs will warm to this consolidation with the expectation that gold’s correlation with expanding money supply will continue.”
Technically, Lusk said, a settlement below the 200-day moving average of $1,289.60 for the December futures could mean more selling. He pegged chart support around $1,279. Below this, he listed another chart level down around $1,263.
“That, in my view, would probably be a near-term bottom,” Lusk said. “I think you would start to see some physical demand start to come back in here due to seasonality….”
This physical demand tends to start picking up in August as jewelers in key Asian consuming nations begin stocking up on metal ahead of autumn holidays and the so-called Indian wedding season, he added.
No major U.S. economic reports were released Monday, but two are due out Tuesday at 10 a.m. EDT. The market will get factory orders and the Institute for Supply Management’s service-sector survey.