Gold climbs to nine-week high

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  • Friday, 10 Sep 2010

GOLD started the week at 1238 and rallied to 1250 on Tuesday last week, capping the biggest monthly gain since April.

Overall, gold climbed 5.6% in August on speculation that the greenback will decline. Investors were worried about US Treasuries and shifted their positions to gold.

However, when gold reached a high of 1254, profit-taking occurred as US equities rebounded strongly and eroded demand for gold as a safe haven.

Analysts are confident that gold’s losses will be limited in light of strong investors’ demand.

In the second quarter, investors purchased 291.3 tonnes in ETFs, boosting the metal’s demand by 36%, according to the data provided by World Gold Council.

Last Thursday and Friday, following a drop in US non-farm payrolls, there were only 54,000 jobs in the month of August, far less than the expected 110,000 counts, gold continued to be sold off to a low of 1237 as investors rushed into US equities.

The metal recovered later to close the week up 0.6% at a nine-week high of 1246.

WTI Crude, meanwhile, started last week at 75.5 and plummeted to a low of 71.5 as concerns about higher US crude inventories and double dip worries surrounded the markets.

Crude stockpiles increased by 3.4 million barrels to 361.7 million for the week Aug 27, compared with analysts’ predictions of an increase of 1.3 million barrels.

This is above the limit of the upper range that tops the supply of crude. However, WTI Crude did not drop but climbed to the 74.0 region instead as the global rally in equities overran the larger-than-expected build-up in weekly crude oil inventories.

WTI Crude rose further after a US government report showed the economy added more jobs than forecast in August. Oil chiefs are predicting that crude prices could reach 80.0 later this year amid stronger growth from China and India coupled with the merger and acquisitions activities that are picking up.

WTI Crude closed the week down 1.6% at 74.3.

Technical analysis

Gold inched higher to 1254 regions last week, before closing at 1246. This week, we foresee gold prices are likely to drop to 1210 regions, provided that resistance level around 1255 regions remain intact.

However, market is currently prone to fundamentals that might push gold prices to retest or even break the previous all-time high at 1265 regions.

If this happens, gold may go up to as high as 1285 regions before the next major retracement comes in. 

Crude oil prices were in consolidation last week as the range is still within the preceding week’s range despite the volatile movement. Having been well supported above 71 regions, crude oil is likely to continue consolidating this week with slight bullish bias, with target aimed at 78 regions.

On the other hand, breaking below 70 regions may retest the support level around 67 regions before buying sentiment resurfaces.

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