Gold price at lowest since May last year, test at $1,520 seen possible

Apr 4, 2013 - 11:45 AM GMT
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Gold plummeted to its lowest price in 10 months on Thursday morning, hit by the double-whammy of risk-off sentiment across assets broadly and reduced safe-haven demand following the resolution of the Cyprus crisis.

Since the start of the week, spot gold has fallen nearly $60 from peak to trough – it was last down $11.90 or nearly one percent on the overnight close at $1,544.90/1,545.50 per ounce. Earlier in the session, it fell to its lowest since May 30 at $1,539.95.

“The precious metals complex continued to be sold aggressively, as investors and physical buyers seem to be sitting on the sidelines thinking they will get a better opportunity with the falling prices,” MKS Capital analyst Alex Thorndike said.

“Safe haven buying seems to be absent despite the ongoing political turmoil seen in Europe and the ever expanding balance sheets of the world’s largest economies,” he added.

Gold has long-term support in the region of $1,520, with a 20-month low at $1,522.62 per ounce.

“One gets the feeling if we trade sub $1,520, gold could easily have another leg lower as stop loss orders seem to be accumulating, and it is the last firm support level in sight,” Thorndike said.

All eyes will be on US jobs numbers today and tomorrow – US employment levels have been made central to the longevity of quantitative easing in the US.

Later today, US weekly unemployment claims are expected to come in at 352,000, while tomorrow’s change in non-farm employment is forecast at 198,000. Any large deviation from these numbers could have a severe impact on gold.

The market will also keep a close eye on central bank statements, with the European Central Bank and the Bank of England both holding meetings today. Earlier, the Bank of Japan delivered on its promise to work towards higher growth by increasing its bond purchasing programme by 50 trillion yen ($520 billion) per year.

Gold ETF outflows also continue, with the GLD fund seeing further outflows. But some analysts have downplayed the importance of this.

“There is lots of hype about ETF redemptions but I think they are down less than seven percent from their peak, which is not that much given the price weakness,” FastMarkets analyst William Adams said. “Also, this scale of fund liquidation selling has been seen several times since 2001.”

Importantly for gold, however, support from physical demand in China is lacking, with markets there closed to mark Qingming today and tomorrow.

In other markets, equities are mixed to higher. The FTSE 100 was effectively flat but German’s DAX was up 0.3 percent and France’s CAC-40 was up 0.8 percent. In Asia, the Nikkei is up more than two percent but the Hang Seng is down 30 points at 22,337.

In currencies, the euro lost half a cent against the dollar, falling to 1.279. And in other commodities, three-month copper is down $8 at $7,365.50 per tonne on the LME while spot Brent crude is up 52 cents at $107.34 per barrel.

The rest of the precious metals have followed gold again, though losses today were less pronounced. Silver was down 14 cents at $26.83/26.88 per ounce. Earlier in the session, it fell to its lowest level since July 23 at $26.68.

Platinum also set its lowest price since August 2012, falling to $1,508.50 earlier. It was last at $1,520/1,524 per ounce, down $11.  Palladium fell to its lowest since March 20 at $740.50 and was last at $738/743, also down $11.

(Editing by Mark Shaw)