Gold: Signs of a Downturn as Investment Demand Cools

On Monday, spot gold marked a day-low near $1,883 before bouncing back to $1,912, still down 2.0%...

Trader 1

On Monday, spot gold marked a day-low near $1,883 before bouncing back to $1,912, still down 2.0%. Surprisingly, the plunge in U.S. stock markets failed to spur safe-haven demand for the precious metal. In fact, the correlation between the two types of assets have been fairly positive since March.

Investment demand has been one of the factors that pushed gold price to historical high, however it appears to be slowing. Bloomberg data showed that total known ETF holdings of gold increased just 0.9% in August (+0.8% up to last Friday for September), compared with 2.8% to 5.7% growth in March to July. On the other hand, total known ETF holdings of silver (spot silver slumped 7.7% yesterday) is on track to post its first monthly decline this year.

From a technical point of view, spot gold has broken below a bullish channel drawn from March, signaling more downside risks. It has also breached below the 50-day moving average, while the 20-day one is skewing downward. The level at $1,975 might be considered as the nearest resistance, with prices likely to test the 1st and 2nd support at $1,863 and $1,808. Alternatively, a break above $1,975 would suggest that gold has stabilized and open a path to re-test the next resistance at $2,015.

Source: Gain Capital, Trading View

Build your confidence risk free

More from Gold

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.