Posted on 02/18/2013 5:50:04 AM PST by ExxonPatrolUs
Gold bounced back on Monday from a drubbing that sent the precious metal to a six-month low late last week, however, analysts say further upside is dependent on whether gold can hold on to a key support level over the next few days.
"I think today (Monday), because we've had a relatively good bounce back, the market will focus on $1,600 and the ability for gold to trade through $1,630 will be quite critical," said Jonathan Baratt, founder of the commodities newsletter Barratt's Bulletin, referring to $1,600 as an important psychological level.
"If it doesn't do that over the next few days, we would look for lower prices," he said.
(Read More: The Big Bet that Gold Will Hit an All-Time High)
Gold was trading at about $1,613 an ounce in Asia on Monday, up from a six-month low of $1,598 on Friday. Analysts say the precious metal has been hurt by a general move into riskier assets, notably equities as confidence about the global economic outlook grows.
In addition to that, regulatory filings showing that some of the world's most well-known investors, such as George Soros, withdrew tens of millions of dollars out of gold funds in the final quarter of 2012 have weighed on gold prices, which are down about 4 percent since the start of the year.
Nick Trevethan, a senior commodities strategist at ANZ Research in Singapore, added: "If we remain stuck between the $1,600 level and $1,617/20 area and don't move out above that, then we're likely to test the downside again."
(Read More: Whither Gold? Bears Circle as Rally Hits Speed Bump)
And on the downside, gold could move to $1,530, the lowest level hit last year. "There is nervousness from investors after 12 years of gains. We are sitting just above key support levels at $1,530," Andrew Su, CEO of Compass Global Markets in Sydney told CNBC Asia's "Squawk Box."
"If it approaches these levels, people will bail out of long-positions and we will see a longer, sustained fall in gold," he added. "There is a good chance that gold will head lower. What we're seeing is a reaction to a big move into equities and from Soros Management that it sold a lot of gold."
A move to $1,530 would imply a fall of about 5 percent from current levels.
Fund Watching
Demand for physical gold from China and India was expected to lend some support to gold prices and indeed buying from China was cited as a reason for the recovery in prices on Monday.
Big gold funds were also being watched closely for any significant downsizing in their holdings as investors start to turn bearish on gold. Citigroup said last week that gold was in the process of peaking, while on Twitter, Marc Faber, author of "The Gloom, Boom & Doom Report" said that the correction in gold prices was not quite complete.
"The biggest long-term bulls on gold such as the John Paulson fund appear to be holding steady for now," said Trevethan.
(Read More: Bulls Fret Gold Rally May Be Done)
Paulson & Co, the investment vehicle of billionaire investor John Paulson, owned 21.8 million shares in the world's biggest gold-backed exchange-traded fund, the SPDR Gold Trust, at the end of December, unchanged from September 30, according to a filing last week with the U.S. Securities and Exchanges Commission.
By CNBC.Com's Dhara Ranasinghe; follow her on Twitter: @DharaCNBC
The message of the sheep entrails is murky this morning.
> So gold will go down if it doesn’t go up, or vice-versa.
It could be the other way around, as well.
Personally I wonder if some wit has created a three stage water filter. The first stage filters out large particles, the second stage nanofilters out molecules larger than gold, and the third nanofilter permits molecules smaller than gold.
The neat thing about nanofilters is that they are scalable.
This type process is already used to filter pure water, along with those few molecules smaller than water, and it uses only a third of the energy of reverse osmosis.
The bond length of molecular gold (AuAu) is about 2.884 Ångstrom.
I guess, like the sun's effect on global climate, supply and demand in the oil market remain a "mystery" to the media elite.
No, how Obama got elected is a “mystery”.
What he is doing to the economy is obvious.
It's a bit of a mystery to me? Where is all the demand? Wal-Mart sales falling off the table in February... McDonald's sales are down...
There's money-printing, for sure... but, it isn't driving gold prices up?
I've read a lot of stories in the past few weeks about the Russians and Chinese buying LOTS of gold... and yet? The price has been falling.. while Oil has bee rising.
It's pretty odd behavior in the market if you ask me.
The value of the dollar against a barrel of crude is falling.
We’ll see $1600 again before we break $1612. This goofing around at $1607-ish here at 11:00 NYT after this morning’s multiple stabs at $1612-ish is predictive:
X + ($1612.30 - X) * 0.618 = $1607.80 —> X = $1600.52
Eh, close enough. Dunno the time though.
Yes... but, NOT against gold. That's the weird part.
Well at $85 billion a month in money printing eventually Bernanke will destroy the dollar and they won’t be able to manipulate the gold and silver market anymore. Then it will go to $2,500 - $5,000.
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