Gold futures dropped during early trade in Europe today, hovering near a ten-month low, as investors looked to key US data and an upcoming ECB meeting to further reinforce dollars strength. The whole precious metals complex was weighed on for sizable quarterly losses by the strong greenback.
Gold futures for December delivery on the Comex in New York traded at $1 206.3 per troy ounce by 9:09 GMT, down 0.44%. Prices ranged from $1 205.0 to $1 210.6 per troy ounce. The contract dropped 0.59% on Tuesday, reaching a ten-month low at $1 204.3.
Silver for December delivery stood for 0.49% daily drop at $16.975, climbing just $0.12 above a four-year trough reached on Tuesday. Meanwhile, palladium dropped 1.28% to trade at $765.20, having logged a six-month low earlier, and January platinum was down 2.66% at $1 265.70, a five-year low.
“Investors just dont want to be involved with precious metals right now,” Bill ONeill, a principal with commodities investment firm LOGIC Advisors, said for The Wall Street Journal. “There is no physical interest. There is no investment interest. Until we get out of this pattern, we are just going lower.”
End-of-quarter technical dynamics and a strong dollar weighed heavily on the whole precious metals complex Tuesday. Gold lost about 9% this last quarter, platinum closed for a 12% loss, palladium was down 8%, while silver shed 19%.
Meanwhile, holdings at the SPDR Gold Trust, the largest exchange-traded gold-backed fund, dropped 2.5 tons to 769.86 on September 30, the lowest since December 2008.
The US dollar, meanwhile, reached a four-year peak against a basket of other major currencies yesterday at 86.33, closing the quarter for a ~8% increase, banking on upbeat US economic data, and a more hawkish Fed.
The Conference Board’s US consumer confidence index, a key gauge on US consumer sentiment, unexpectedly logged for a sizable downgrade to 86.0. Consumer sentiment is a vital indicator to consumer spending, which in turn accounts for about 80% of US GDP. The news, however, hardly impacted the US dollar, as traders are wary of big moves ahead of the more important data later this week.
A bunch of more economic data from the US is also due for release today. ISM will post its US manufacturing PMI, set to log another month of massive expansion, while ADP will post its flash payrolls readings, looking to log 200 000+ new jobs in September, recovering after the slump in growth in August. The official report, due on Friday, is the leading indicator for the health of the economy, and as such has a massive impact on the valuation of the dollar.
Another significant factor in dollar valuation is the strength of the euro. The euro reached a two-year bottom against the dollar at 1.257 EUR/USD yesterday, closing the quarter for an 8% drop against the greenback. The euro turned downwards recently, as downbeat data from the Bloc pressured its currency, prompting the European Central Bank to lower its benchmark lending rate to the historic low of 0.05%, and introduce a €3tn stimulus program. Key for the euro will be Thursday’s European Central Bank (ECB) meeting, the first after the Bank went highly accommodative.
Eurozone manufacturing PMI, posted earlier today, was the latest in the string of bearish data, with the Bloc barely logging growth in the factory sector in September, while Germany posted a contraction for the first time in fifteen months.
Previously, key unemployment and CPI figures from the Eurozone were also posted. The unemployment rate was logged unchanged at 11.5%, while consumer inflation, as expected, dropped to 0.3% on an annual basis. Core CPI, however, was lower than forecast at 0.7%.
“The platinum group metals are worn lower by weak gold, a strong US dollar and heavy speculative liquidation” at the end of the quarter, James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note cited by Bloomberg. “Further losses in both PGMs will encourage trade and end-user physical buying. But we expect platinum may go well below $1 300 and palladium to drop to $750 before this buying materializes.”
Technical support and resistance levels
According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 212.2. In case futures manage to breach the first resistance level at $1 220.1, the contract will probably continue up to test $1 228.6. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 236.5.
If the contract manages to breach the first key support at $1 203.7, it will probably continue to slide and test $1 195.8. With this second key support broken, the movement to the downside may extend to $1 187.3.
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