After the gold price stabilised at the technically-important level of $1,610 per troy ounce at the beginning of the week, the yellow metal was set for a one-day rally, lifting its price to $1,675 per troy ounce on Tuesday. This technical hurdle could not be taken by the bulls, since there was a lack of follow-through buying. The result was that the gold came under sales pressure again in yesterday's trading session, after hedge funds took advantage of higher price levels to get rid of gold positions and take profits. The US dollar rose further against other major currencies contributing to the decline in the precious metals sector, which knocked the silver price lower; at one point yesterday the white metal dipped below the important technical level of $30 per ounce.
This development could be a sign that the consolidation phase in the silver sector has still not come to an end. Technically, it appears that the price range between $24 and $27 per ounce could serve as the next support level. It remains to be seen whether industrial end-users consider this price level to be attractive enough to stock up on silver. The gold price lost around 3% to $1,615 per troy ounce yesterday. In Asian trading the yellow metal continued its downtrend and stabilised just above $1,600 per troy ounce. From this level gold recovered and climbed to $1,625 per troy ounce again.
Besides silver, palladium as well as most base and non-ferrous metals were also under strong sales pressure. In addition to a declining silver and palladium demand among industrial end-users, both precious metals are currently suffering from shrinking interest among financial market investors. Last week's sharp silver price setback of almost 30% resulted from many market players being forced to liquidate overly leveraged positions. Liquidity fell, forcing many investors into fire sales of their assets. The recent downtrend in the copper price is a good indicator of this. The deteriorating outlook for industrial demand is weighing on metals such as copper, silver, palladium, aluminum and zinc.
In the case of copper, the London Metal Exchange – the world's largest marketplace for base and non-ferrous metals – announced earlier this week that it would hike margin requirements for businesses in the futures and options trading. The red metal slipped by 5.6% and ended the trading session at $3.25 per pound. Gloomy economic data from the United States contributed to the worsening sentiment in commodity markets.
Though the gold price has fallen by around 10% in the last few trading days, a Reuters report shows that gold Exchange-traded funds (ETFs) holdings are steady. According to the report, physical gold holdings of SPDR Gold Shares (GLD) have recently fallen by only 0.8%, despite gold prices falling by approximately 15% during the reporting period.