Gold’s collapse continues

Gold lost over 2% yesterday and there are few bargain hunters in sight.

Gold is trading $1265, broadly unchanged on the day after suffering its biggest one-day loss since December. Ordinarily short covering and bargain hunting leads to a correction the day following a large move, but traders seem unwilling to take advantage of drop in price. As I mentioned yesterday, the possibility of the European Central Bank introducing monetary easing is driving equities higher, and dealers have more of an appetite for riskier investments.

Solid house price data and services reports from the US yesterday suggest the Federal Reserve will keep its tapering programme on track. This in turn is boosting the US dollar which is negatively correlated with the price of gold.

Gold has found support at $1260; if it can stay above that level it may target the 200-day moving average of $1286. A move below $1260 could put it on a path to $1240. 

Spot gold chart

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