RS: Gold Jumps Again 'But Rangebound Below $1,640'
The wholesale market gold price rose again as New York trading began on Wednesday, extending yesterday's 1.8% jump to reach $1,620 per ounce as new data showed US retail sales falling faster-than-expected in May.
Silver bullion recovered an earlier slip to trade just shy of $29.00 per ounce. The Euro currency held flat but European stock markets slipped with commodity prices.
Spanish borrowing costs rose to new euro-era highs at 6.73% for 10-year debt, while Italian bond yields also rose to a 6-month record, unwinding the effect of €1.1 trillion in LTRO loans made by the European Central Bank to commercial lenders last winter.
Rome today cut to €6.5 billion the amount of new 1-year debt being sold at auction, but it still had to pay investors 3.97% per year in interest – well over one-point-five percentage points more than at the last time of asking in May.
"If euro bond yields continue to escalate," says one gold dealer in Asia, "gold could remain [well] bid."
Weaker-economy Eurozone bond yields have now reached or breached levels seen before the European Central Bank lent commercial banks €1.1 billion in 3-year loans starting December last year.
The gold price for euro investors today jumped €41,500 per kilo, a level first reached in mid-August 2011 and approached this week on what analysts variously called "central bank...Chinese [or] Indian...private banking [or] electronic buying."
"Who knows?" asks one precious metals strategist in a note. "Apparently no one in the market."
Tuesday was "the 7th consecutive day of alternating between 'Up' and 'Down' days" in the gold price, notes Russell Browne at market-making bullion bank Scotia Mocatta.
"From a price perspective, the 1559 support is key ahead of 1528 [while] 1640 is the topside trigger for a move higher."
"Consolidation is ongoing," agrees Axel Rudolph at Commerzbank in Luxembourg, also saying the gold price "remains essentially range bound within the confines of its major 1532 support zone...and the 1641 current June peak."
Buying commodities such as gold "at current lows" has "always been profitable" over the last 18 months, said Kevin Norrish, managing director of commodities research at Barclays, speaking in Johannesberg, South Africa, today.
"A break below [current levels] would be a major change" to the long-term trend, he said.
