Gold: bulls staying away for now

4 Dis

Gold traded in a narrow range yesterday to end effectively unchanged. There was more of the same in early trade this morning. Gold bulls have been shaken by several recent events, the first being the protracted slump which followed Trump’s election victory in early November. Prices sliced below intermediate support at $2,600 in a move that must have driven out a stack of leveraged buyers. Gold only managed to stabilise after dropping into the $2,530s, an area that acted as resistance in August through to September this year. It then staged a strong recovery, breaking back above $2,700 in little over a week. This rally boosted bullish confidence. But that was suddenly shattered by another brutal sell-off in the last week of November. This single-day drop of 4% has caused considerable damage to the bullish consensus, and the gold market has yet to recover. It was encouraging that gold managed to hold above $2,600 this time. But upside progress has been weak so far. Would-be buyers are wary of walking into another sharp sell-off, and for confidence to return, gold may have to consolidate further and prove itself resilient to downside pressure.