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Gold Struggles As The Cat Is Out Of The Bag

BySaxo Bank
AuthorSaxo Bank
Published 12/20/2013, 05:16 AM
Updated 03/19/2019, 04:00 AM

The announcement by the US Federal Reserve last night that tapering will commence to the tune of USD 10 billion next month was the news that the precious metals market had expected and feared for the past six months. The initial subdued reaction pointed towards some indifference but today we have seen renewed selling with potential buyers sitting on the fence waiting to see how low it can go.

The deteriorating outlook, at least in the near term, has triggered a return to negative momentum on gold, platinum and palladium with silver not far behind as the sector reacts to the continued and for now lost battle to tempt investors away from equities. Gold will finish 2013 on a defensive note with sellers who are now firmly in the driving seat trying to push it back down towards the July low at USD 1,180.5/oz and beyond that USD 1,155/oz. A recovery back above USD 1,250/oz is now required in order for short sellers to reconsider.

With illiquid markets expected for the remainder of the year after tomorrow, most of the position squaring from disappointed longs will most likely be seen before then and this has also added to the overall selling pressure today. Technically, gold has not closed below USD 1,200/oz since August 2010 so an important battle is currently being played out. The chart below shows how the extension of the previous down move is currently targeting USD 1,179.4 and with this level also corresponding with the 2013 low, many technical short sellers may use this level as potential target area.
Spot Gold

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