The sharp drop in prices this week has been met with a surge in physical demand as our corner of the market has come to life. Unfortunately, the sharp sell-off is likely another thorn in the side of speculators who trade from the long side, as many were unlikely to exit the position fast enough to have locked in a profit. Overnight trading in Asia was quiet and, like Sunday night, may have been the catalyst for the sellers to step up until support was found in gold in the low $1,290.00s. In early trading this morning, gold is the sole precious metal higher on the day as it is trading on either side of $1,300.00.
Fed Chair Yellen gave a difficult to follow / confusing testimony to the Senate Banking Committee yesterday with several comments that moved the markets. In our case mostly lower, but bonds and equities went back and forth several times. Precious metals focused on comments that indicated her belief that the Fed is on schedule to begin raising rates in the second half of 2015, which should strengthen the USD and pressure gold. Chair Yellen begins the second day of testimony on the “hill” shortly, so all markets are likely to again be impacted.
Back to the sell-off for a last comment. Physical demand is quite good again this morning and following the hold of the 50-day moving average at $1,292.50, gold is moving higher and is now trading at $1,304.00. A settlement above the 100-day gold average at $1,303.75 could see us testing the 10-day average this week which currently stands at $1,318.00.
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