Gold’s hard earnt rally ends with a high altitude decompression in prices with the emergency two-day descent unwinding a month of slow gains.
What took four weeks to build has taken two days to take away. Gold plunging again overnight for the 2nd day in a row, falling nine dollars to close at 1275.00. Gold has now given up almost all of its hard-won gains of November in the space of 48 hours.
Excellent U.S. consumption and preliminary GDP data saw the U.S. 10-year bond yield rise to 2.435% overnight, while the passage of the U.S. tax bill making progress through the Senate saw shares spike again. All of this torpedoed gold below the waterline as traders headed to the exit door for better returns elsewhere.
As the dust settles, gold is still stuck in its two-month trading range but is now much nearer to its lower boundary then its higher one. What is far more concerning is the price action in gold. It has been a slow climb up the stairs over the past month, followed by a leap out of the top floor window for prices to crash.
It should be of concern to longer-term bulls and underlines the fragile nature of golds pricing at the moment in the absence of any geopolitical safe-haven factors. With monetary conditions set to tighten next year in many parts of the world, gold may find fewer friends as we head into the last month of the year.
Gold has eked out a small $1.50 gain to 1276.50 in Asia trading this morning. Having closed below its 200-day moving average at 1286.00 on Wednesday, gold tried and failed to test it yesterday before crashing. This is the crucial pivot point that must be regained for bullish traders breath a little easier.
Below, gold has six-week trendline support nearby at 1272.00 followed by the 200-day moving average at 1267.00. The critical long-term support remains at 1260.00, with a daily close under there perhaps signalling a renewed rush for the exit door by longer-term positioning.