As my colleague David Madden pointed out yesterday, there was renewed optimism for the precious metal as gold bugs were hopeful that the new Indian government would have a slightly more relaxed attitude towards taxing imports.
This optimism has quickly evaporated following the World Gold Council’s revelations about China, the world’s biggest consumer of the metal. Chinese demand has dropped in the first quarter of 2014 by 18%. This is being attributed to lower demand for gold as a store of wealth and as a defensive hedge to global troubles.
Over the course of the day gold has traded as low as $1286, just below the 200-day moving average. Every time it has drifted down to the $1280 level the buyers have returned.
Although we have seen volatility in gold it continues to bounce along the support, and only a close below $1278 would cause me to change my stance.