Currency Analyst since 2010

Gold: weekly review

By Sergey Ruban

Gold traded unevenly last week. Nevertheless, it managed to stay on the same level by the end of the week.

Chinese authorities said that they were conducting an investigation in relation to the gold misuse as collateral for loans since 2012. Such loans were issued totaling 94.4 billion yuan ($15.2 billion). Market participants fear that Chinese authorities may tighten the conditions for this type of lending, which, in turn, can weaken an import demand.

China is the world leader in the consumption of gold, and the threat of falling demand from it immediately provoked the price backlash. However, the decline was short-lived as the details of the investigation are not yet known. However, some investors took advantage of a short-term fall to the $1,300 area to build positions in gold.

Later statement by the head of the Shanghai Gold Exchange that the actual demand for gold in China in the Q1, 2014, grew by 0.8% y/y (up to 323 tons instead of 263 tons in the previous May report), and then the negative report on the economic growth rates in the US allowed the bulls to resume metal buying.

From a technical point of view, the support around $1280.00/1300.00, as expected, will limit the possible correction. Still we do not exclude the price growth to the area $1330.00. Overcoming this resistance will confirm the uptrend towards the resistance of $1392.00 and $1433.00.

Only a break and firm consolidation below the support of $1280.00/1300.00 cancels a positive scenario and re-target the gold in the fall to the support around $1240.00 and $1200.00.

Chart. H4 XAU/USD

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