Commodity Update; Gold – 26 September 2014

Gold breaks $1200; falls toward the key $1180 level

Gold continued its descent throughout much of this week as low physical demand and the evolving monetary policy outlook in the US saw investors left with little incentive to increase exposure to the metal.

Rumours that capital controls were being considered in Russia caused a temporary rally in the metal during the middle of the week, although this proved short lived as stronger than expected payrolls and unemployment data from the US led investors to look once again at the likely timing of the FOMC’s first interest rate increase.

In addition to the above, Friday’s US economic data also led to a broad based rally in the dollar. This exacerbated the pre-existing weakness in gold by effectively eradicating much of the discount available from reduced prices, thus discouraging those with the “buy on dips” agenda.  

Consequently, the gold price has broken below the $1200 mark and now appears to be heading toward a test of the all important $1180 support level. In line with our previous comment, we view a resounding break below this point as a clear indication that the longer term downward trend has resumed, which implies that it is only a matter of time before the $1000 level comes into view.

Spot Gold 10 Minute Intervals

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