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UPDATE: Gold Dips Below $1,600 First Time Since Summer As Sell Stops Triggered

By Allen Sykora of Kitco News
Friday February 15, 2013 11:20 AM

(Kitco News) - Gold fell below $1,600 an ounce Friday for the first time since August as sell stops were activated when prices fell below prior chart support around the previous lows for the year, traders and analysts said.

As of 11:05 a.m. EST, spot gold was $29.70, or 1.8%, lower to $1,605.20 an ounce and has been as weak as $1,598.20. The most-active April futures contract on the Comex division of the New York Mercantile Exchange was down $31.30, or 1.9%, to $1,604.20, bottoming at $1,596.70.

“We reached some long-standing support at $1,625-30,” said Robin Bhar, metals analyst with Societe Generale. “We moved through there, and that set off some more momentum-based selling.”

Afshin Nabavi, head of trading with MKS (Switzerland) SA, also cited technical stop-loss selling around $1,625-30, coupled with the continued absence of potential Chinese buying this week due to Lunar New Year holidays. Further stops were hit around $1,615, he added.

Stops are pre-placed orders automatically activated when certain price points are hit. Traders use them to kick themselves out of trades to either capture a profit or limit losses, or else to open new positions to capitalize on a short-term move.

Sentiment toward gold has been hurt lately by improved optimism about a global economic recovery, Bhar said. As a result, he continued, some market participants have exited gold as a hedge and are instead chasing equities and other commodities.

Both Nabavi and Bhar see potential for gold to bounce next week, however. Participants in China will be back in the markets, plus buying can be expected in India ahead of another wedding season. A World Gold Council report this week listed these as once again the world’s two largest consuming nations in 2012.

“There might be a corrective bounce higher…on some physical buys,” Bhar said.

 

By Allen Sykora of Kitco News; asykora@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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