Gold plunges as dollar strengthens
London ( Sept 30) The gold price remains under pressure from a strong dollar, which is still near two-highs against the euro ahead of a Chinese holiday tomorrow that will drain liquidity from the market.
Spot gold was last down $5.20 at $1,209.50/1,210.20 per ounce, its lowest since January 2, in subdued trading.
“A quiet day ahead of Chinese Golden week which starts tomorrow,” Marex Spectron said in a note. “This will see a large portion of the participants in the precious metals markets removed for a few days and may mean that price movements will be rather choppy.”
The dollar is around a two-year high against the euro at 1.2598 and the dollar index at its highest since July 2010 at 86.04.
“Prices are trying to form a base with gold trading either side of $1,220 – the double bottom is at $1,180 so may still be tested but for now support is evident above $1,200,” FastMarkets analyst William Adams said.
“The market is looking oversold – it could get more oversold as the strong dollar is applying downward pressure. After a strong downward run, the shorts may well start to get twitchy if prices do not resume the downward trend soon,” he added.
Gold is also under pressure from a surprising lack of physical demand in India during its annual wedding season. While the market could pick up momentum as Diwali nears, sources in India suggested that many investors are putting capital into equity markets rather than precious metals.
Elsewhere, escalating tensions in the Middle East – the bombardment of Islamic militants continues – looks to be priced in already.
Today is also a heavy day for data – the Chinese HSBC final manufacturing PMI came in as forecast as 50.2. In the eurozone, however, the CPI flash estimate at 0.3 percent was below the previous month’s revised 0.4 percent and the core CPI flash estimate at 0.7 percent missed the expected 0.9 percent.
“Further evidence of a weakening EU economy has boosted dollar strength, which is weighing on metal prices,” FastMarkets analyst Tom Moore said.
Elsewhere, German retail sales at 2.5 percent beat the forecast 0.6 percent and French consumer spending at 0.7 percent better the predicted -0.2 percent but the German unemployment rate and the Italian preliminary CPI both undershot.
From Japan earlier, household spending at -4.7 percent disappointed as did industrial production at -1.5 percent, although the unemployment rate, retail sales and average cash earnings all beat expectations.
From the US, the market awaits the Chicago PMI and the all-important CB consumer confidence figure.
In the other precious metals, silver remains at four-and-a-half-year lows at $17.35/17.40 per ounce, down nine cents, while platinum at $1,295/$1,305 was up $1 increase but holding just above October 2009 lows. Palladium at $781/786 was $2 lower.