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ABC Bullion

Volatile start to the week as metals climb higher

13 May 2014

Precious metal investors were treated to a volatile trading day on Monday the 12th May, as gold prices eased below USD $1280oz in early Asian trading hours, before turning around and rallying sharply, climbing all the way to USD $1305oz.

Currently, gold is sitting at USD $1296oz, effectively in line with the key 200DMA. Early falls in Asia were a classic ‘buy the rumour sell the fact’ scenario, with the weekend elections in Donetsk giving support to prices on Friday leading into the event, but sparking a sell off once the results were in and went much as expected.

The market regained its footing on the Chinese open, and its encouraging gold again held its 100DMA so convincingly, though we’ll need to see a close above USD $1300oz before any real excitement comes back into the sector.

Tonight’s retail sales in the US could be a catalyst, but only if they miss expectations by some margin.

Opinions toward precious metal prices are still conflicted at best, with Barclays Capital still forecasting lower prices; stating “the floor looks to be softening for gold, with physical demand not making up for soft investor demand” Some analysts have looked at data from the China Gold Association, which showed a 44% drop in demand year on year for gold bars as proof of the supposed weakness on the physical side, but this overlooks the fact that total gold demand in China actually rose ever so slightly in Q1 this year, to an incredible 322.9 tonnes, as jewellery demand hit 232.53 tonnes alone.

Remembering that over 80% of Chinese see 24k gold jewellery as 'an investment' and you can see that the demand for gold as an investment in its own right remains incredibly robust

Apart from the much awaited Federal Budget in Australia tonight, we’ve got a lot of important data to get through with domestic home loan data, Chinese retail sales and industrial production and then much awaited retail sales in the USA.