Gold's brutal 2013 continues. The price of the yellow metal is dropping again, off more than 2% today and breaking well below critical support. As discussed on Breakout just last week, chartists saw $1,305 as a stop-loss level. Once that support broke this morning the sellers came out in droves.
David Lutz, head of ETF trading at Stifel Nicolaus, says reports are circulating that central banks are monetizing their gold holdings, adding supply to an already weak market. He adds that the Bank of Japan is concerned about deflation and India is still clamping down on their imports of gold, eliminating even more potential bidders. "That's a lot of headwinds for the metal this morning," Lutz says in the attached video. "That big gap down that we saw took out the August lows. That triggered a lot of stop losses from the quant shops."
For those uninitiated with trading terms, Lutz is essentially saying institutions can't find any good reasons to get brave and buy gold at these levels but there are some good arguments for selling, at least from a technical perspective.
Sitting just under $1,270 on Friday, gold is stuck in a no man's land for chartists. Lutz says there's some hope that the $1,250 price point might provide some support "but it's a pretty tough trade at this point."
For gold devotees none of the above will be quickly shrugged off as the kind of fear mongering that lets them add to their gold positions at relatively cheap prices. Your portfolio is yours to do with as you see fit, but be advised that after more than a decade of moving higher it could be years before institutional traders become confident that gold is going to move back to its old highs anytime soon.
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