Gold could go back down - page 21
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Gold's Strong Losses Tuesday Somewhat Puzzling, Could Be Portent For Other Markets
The sharp losses in gold on Tuesday, in which prices were down around $40.00 an ounce and hit a 3.5-month low, are being blamed on a stronger U.S. dollar (mainly due to a big drop in the British pound), some chart-based selling and a bit of Fed speak. (See my PM Kitco Metals report). However, the magnitude of gold's downslide Tuesday compared to the only moderate gains in the U.S. dollar index today, are somewhat puzzling. Also, today's comments from a Fed official that seemed a bit hawkish on U.S. monetary policy are not that different from other Fed officials' hawkish comments we've heard the past few months. One could argue that gold should not have been down anywhere near $40.00 an ounce based upon today's news events. However, "it is what it is" and markets are never wrong on any given day.
What Tuesday's big downside price action in gold could be forecasting is bigger and unexpected price moves are on the horizon for other markets. This is especially compelling given that it is early October--a month that has been historically turbulent for many markets. If indeed the gold market's big down-move on Tuesday is a harbinger of things to come in other markets in the near term, the irony is that such an outcome could actually be a bullish development for safe-haven gold.
Why gold’s plunge below $1,300 may be a buying opportunity
Gold might have further to fall in the near term, but market bulls expect the retreat to offer investors who missed gold’s first-half 2016 rally a strong buying opportunity. Bears say it could get ugly first.
Gold futures haven’t suffered a one-day drop as extreme as Tuesday’s selloff since 2013—and the last time they settled this low was on the day the U.K. cast its vote to leave the European Union.
December gold dropped $43, or 3.3%, on Tuesday to settle at $1,269.70 an ounce—the lowest close for a most-active contract since June 23, according to FactSet data. The percentage loss was the largest since December 2013 while the dollar decline was the biggest since June of that year.
Shares of the SPDR Gold Trust GLD, -3.47% fell more 3% lower Tuesday, but remains up over 19% year to date.
The selloff took gold futures well below the technically psychologically important level of $1,300 and ounce—a level not seen since June 23 and the Brexit fallout, said Adam Koos, president of Libertas Wealth management Group. This “has shifted the short-term picture for the yellow metal and evidence is pointing to additional sell-side pressure, pushing gold prices down further from here.”
U.K. Prime Minister Theresa May on Sunday indicated she would pursue a clear break from the European Union by the end of March. That fueled a sharp drop in the British pound GBPUSD, -0.1571% which has benefited the dollar. And a stronger dollar often pressures prices for gold, which is traded in the greenback.
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The decline stopped for now. Waiting for another wave when DB news start again