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Gold softer as we approach weekend

25 July 2014

Sadly, news headlines today were again forced to focus on yet another airline tragedy, this time the crash of an Air Algerie flight from Burkina Faso to Algiers, with 110 passengers on board.

Moving onto economic news, and we can see that PMI data out in the last 24 hours was pretty strong, with China recording a rise to 52 points, and the European composite rising to 54 points, although Frances manufacturing results weakened.

Whilst this strength would be expected to support industrial commodities, not everyone is so sure, with Capital Economics stating that the near term outlook for both oil and industrial commodities remains weak, with fears that the Eurozone recovery is losing steam, and that there is more weakness ahead in the Chinese property sector.

In the US, the Markit Manufacturing PMI fell to 56.3 points, below expectations, whilst new home sales cratered, down nearly 10% to just 406,000 homes (whilst Mays numbers were revised downwards significantly too.

Looking at gold, and it was another day of weakness, with the yellow metal trading all the way down to USD $1286oz at one point, whilst silver fell as low as USD $20.23oz

The chart below shows the past 24 odd hours of gold trading (courtesy of Zerohedge), and you can see the violent swings pretty clearly.

Gold 25th July

Going into next week its hard to be anything more than neutral, if not short-term bearish.

The Futures market had clearly gotten ahead of itself a week or so ago, though we can expect some of that froth to have dissipated in the past fortnight.

ETF holdings have stabilised this year and we’ve even seen some inflows of late, with early July marking the largest increase in years.

Key moving averages should prove somewhat supportive as well, with the 200DMA at USD $1285oz particularly important to watch.

Finally, there’s Asian physical demand, which has been weak (relative to the record levels of 2013), but should step up with the market below USD $1300

All the best