The gold rally in gold lost some steam on Tuesday even while oil prices remain weak and worries about the Chinese economy persist.
Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $5.90 at $1,090.30 per ounce. Trade has ranged from $1,088.50 to $1,099.10.
“I’m slightly disappointed that it didn’t manage to close above $1,100 again and, overnight, we have seen next to no buying despite continued uncertainty in China, a lack of buying in stocks and oil weakness,” Marex Spectron’s David Govett said.
“I’m starting to think that in the absence of any further friendly news, we may see a bit of a sell-off as disappointed longs start to get out of their New Year positions,” he added.
The focus of the capital markets this morning shifted to the yuan. For the second day in a row, it strengthened against the dollar – the the People’s Bank of China was allegedly in the market buying renminbi against the greenback.
“As one ‘wag’ in Shanghai said, the size of the operations appeared to be nuclear and was intent upon forcing those speculating against the renminbi to desist in further such activities,” Dennis Gartman, editor of the Gartman Letter, said.
“Capital is fearful in China that it may eventually be trapped there permanently and it is relentlessly seeking ways to move abroad. This will not stop this week, nor shall it stop next month, nor next year, nor next decade. This is a ‘permanent’ movement of capital out of China,” Gartman added.
All recent data signals that China’s economy is stuttering; equity markets there are set for further losses, which will affect global bourses.
Meanwhile, in wider markets, the dollar was 0.16 percent stronger at 1.0843 against the euro, while the Shanghai composite index (SCI) closed up 0.2 percent and Germany’s DAX was last 2.39 percent higher.
Light sweet crude (WTI) oil was around fresh 12-year lows – it last traded at $31.41 per per barrel but earlier fell to $30.41.
“Oil prices are finding it simply impossible to bottom out,” Commerzbank noted. “Market sentiment, current momentum and the technical picture all suggest that prices will continue to drop.”
As for the other precious metals, Comex silver for March delivery was down 12.6 cents at $13.740 per ounce. Trade has ranged from $13.730 to $13.910.
Platinum for April delivery on the Nymex was down $8.50 at $837.80 per ounce while the most actively traded palladium contract was at $465.75, down $8.55.
“The virtual collapse of platinum and palladium values has caught everyone wholly off-guard, and which we take as a sign that global auto manufacturing shall begin to wane given the importance of both palladium and platinum in the catalytic converters in internal combustion engines,” Gartman said.
(Editing by Mark Shaw)