Gold Firmer, But Downside May Beckon

Bullion fixed at $378.65 an ounce, compared with $377.60 on Friday afternoon, after prices bounced from recent lows overnight. Prices had sunk about $5.00 last week on selling attributed to gold miners, a central bank and speculators.

A fresh test of recent lows just under $377 was possible in the near term, dealers said.

But some said that with most of the market expecting prices to head lower, an upturn seemed more likely.

It seems a bit of a bear trap, we may have seen the low for the moment, one said. We may see a bit of consolidation, a bit of buying now, he added, pegging the near term maximum at the important $380.00 level.

 

Price charts showed gold twice at $376.80 recently. Analysts said this suggested a double bottom formation had formed, providing support for gold at that level. But both the 10- and 30-day moving averages were moving lower, which indicated golds downward movement had accelerated.

The market may pick up following the US presidential election today, dealers said.

We may some more life after the (US presidential) elections, although what Clinton has to do with gold is a mystery, one dealer said.He also noted that the pattern set over many months of prices declining after option expiries appeared to have changed.

There was no perceptible fall after the expiry last week of over-the-counter options, which provide the right but not the obligation to buy or sell metal at a give price.

The option writers strategy seems to have changed. It is not very profitable to write gold options on the basis of a volatility of 4.5-5.00 per cent. The situation is a lot less clear cut now than it was, he said.

Silver prices were firmer with gold, up four cents from Fridays London close at $4.81/$4.83.

Platinum was up $1.00 at $380.50/$381.50 after dropping below the $380 an ounce support level last week.

Silver and platinum have been holding quite well, and they are going to be key, a dealer said. If silver gets below $4.74 and platinum goes below $380 its not going to look good for any of the precious metals.

Palladium was unchanged at f$115.75/$116.75.