Looking for some commentary on gold’s recent move lower? See the below summary from our in house gold guru John Reade
Gold has posted a substantial correction over the past forty eight hours and, after trading above $2,400/oz late last week, is now around $2300/oz. There appears to be two reasons for the correction: Firstly, geopolitical calming - markets and media have interpreted Israel's limited strike back against Iran as an attempt to defuse tension. Secondly, there is increasing evidence that the move from about $2,200-$2,400/oz was driven by short term speculation on the Shanghai Futures Exchange, and perhaps to a lesser degree, in the T+D contract of the Shanghai Gold Exchange. Short-term traders in leveraged futures markets, as we have seen many times over the years, can move the price quickly higher or lower and it seems that profit taking may have been at the heart of yesterday’s move lower. If we are right about short-term speculation in Chinese Gold Exchanges being responsible for much of the past few weeks moves in gold, it is further evidence that Emerging Market participants have wrested the drivers of gold from western traders. This makes the recent divergence of gold from its historical anchors of the US dollar and Fed funds expectations more understandable and may mean gold market observers will have to pay attention to additional factors to divine gold’s prospects.