how low, page-6

From Money Morning Australia its not the article l was referring to but basically says in the last couple of paragraphs the same thing.
Cheers MB

The gold market is dual: there is the physical market and the financial (paper, futures) market. The spread between those 2 markets is currently widening. Indeed, on one hand the demand of physical gold is growing everywhere in the world in the current context of economic and financial crises. The holders of physical gold don’t sell anymore as they expect a future rise in the prices.

On the other hand, the financial market is impacted by the deleveraging done by the hedge funds that are obliged to sell to cope with their redemptions.

The “premium”, which measures this difference between the physical gold price in a coin and the spot price, has never been as high as it is now: in the US, in Europe, in Australia and in South Africa, it’s around 25%!

During the recent meltdown, while mining companies, crude oil and metals have been hammered by the sell-off, Gold has been the only asset class that remained attractive for traders and investors. Prices jumped back above $900 an ounce when the equity markets posted new lows two weeks ago.

Now that the equity markets try to rebound, the precious metals crash. Silver and platinum continue their massive slide while Gold prices moved back below $800. As mentioned above, the leveraged hedge funds raising cash to meet their redemptions have sold (profit-taking) their Gold positions.


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Moreover, the decline of Oil prices are also a driver of the Gold slide as it decreases the inflation pressure that is beneficial for Gold (as a natural hedge instrument against inflation). The recovery of the US Dollar is another element that weighs on Gold prices.

Technically, the main support level remains at $750, which is a previous high posted several times in 2006 and 2007 (points A, B and C on the chart) that became a new low posted in last September (point D). Today Gold is trading around $770, which means that a further fall of just 2.60% would lead the price action to the support line.

It may be the opportunity for a rebound but obviously the indicators are really bearish. Both the technical Momentum indicator and the MACD have triggered negative signals and the oscillators are far from being oversold. It means that a further decline is probable that would clear the $750 support level on the downside.

In this scenario the new medium-term target is around $630, which is the low level hit in 2006 and that constituted a basis support for the upside move occurred from late 2006.

Good Investing,

Gabriel