Gold Price Set to Drop into Aggressive Accumulation Zone

On gold's 4-month chart it is now apparent that a bear Pennant has been forming since the panic bottom, with the weak upside volume portending an imminent breakdown and steep drop. A reader pointed out to me during last week that gold's panic lows occurred in thin trading on the Hong Kong market, and for this reason we do not have to factor in the tail of the hammer candlestick when deciding where to draw the boundaries of the Pennant.

The measuring implications of this Pennant call for a drop at least to the vicinity of the intraday lows of the Reversal Hammer and possibly somewhat lower towards the $1520 area - at this point the decline should have completely run its course and we will be looking to buy aggressively.

If we look carefully we can see that a small "bearish engulfing pattern" has formed in gold over the past 2 trading days, implying that breakdown from the Pennant and the expected steep drop that will follow is imminent. A reason why this next drop should end the decline is that gold is already deeply oversold as shown by its MACD indicator, and it will of course be even more so after this impending decline.

Those interested in going long gold investments in the near future should "keep their powder dry" but stand ready to wade in big time if gold drops into the bright green "aggressive accumulation zone" shown on our chart.

Gold Price Set to Drop into Aggressive Accumulation Zone

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Switzerland`s Scoach first to allow gold currency derivative trade - FAST NEWS | Mineweb

As of Monday, Scoach became the first exchange in the world to allow trading in gold-denominated structured products and might also allow exchange traded funds, with gold as the trading currency.
Author: By Martin de Sa'Pinto (Reuters)
Posted:  Monday , 10 Oct 2011


ZURICH (REUTERS)  - 
Swiss structured products exchange Scoach has become the world's first exchange to allow trading in gold-denominated structured products and might also allow exchange traded funds (ETFs) with gold as the trading currency.

Structured products priced in gold, with the international currency code XAU, could previously only be traded over the counter, making them generally less liquid and prices less visible than for products traded on an exchange.

"As of today, issuers can list structured products in gold and trade them in XAU," said Scoach spokesman Stephan Meier.
"There were already structured products denominated in XAU, but previously you couldn't trade them on an exchange."
Scoach, a joint venture between Switzerland's SIX Group and Deutsche Boerse (DB1Gn.DE: Quote), teamed up with EFG Financial Products, the structured products arm of the Swiss private bank, to launch the new structured Products.

"In times of world uncertainty in relation to currencies, gold is a valid alternative. So it is only consistent to offer gold as a trading currency as well," said Christian Reuss, Chief Executive of Scoach Switzerland in a statement.

To invest in XAU-denominated structured products, investors will either need to have a precious metal or gold account, or they can buy the product using francs which their bank will then convert into XAU, Meier said.

"When they sell their products the currency will be XAU. Whether they can cash this in for physical gold will depend from bank to bank," Meier said.

Meier said XAU-denominated ETFs were also a possibility. ETFs -- baskets of securities such as stocks, bonds or commodities -- have attracted floods of money as investors seek cheap, liquid exposure to sometimes hard-to-access asset classes.

Multi-currency ETFs are already listed on the SIX, allowing investors to trade in euros, dollars, yen, francs and other currencies, but there are as yet no products denominated in XAU, Meier said.

"If market participants want to list ETFs denominated in XAU, the international currency code for gold, we could do
that," Meier said.
(Reporting by Martin de Sa'Pinto)
 
 
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Gold rises on EU banks recapitalization pledge - EUROPE AND MIDDLE EAST | Mineweb

Spot gold was up 1.4 percent on Monday after France and Germany put forward a plan to recapitalize euro zone banks, while traders remained cautious ahead of further details of the plan.

Author: By Jan Harvey (Reuters)
Posted:  Monday , 10 Oct 2011 

A

LONDON (REUTERS)  - 

Gold rose more than 1 percent on Monday as the dollar fell versus the euro after France and Germany pledged to strike a proposal to recapitalize euro zone banks, while traders remained cautious ahead of further details of the plan.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks on Sunday that they aimed to come up with a sustainable answer for Greece's debt problems and agree how to recapitalize European banks.

Spot gold was up 1.4 percent at $1,659.80 an ounce at 0915 GMT. Prices of the precious metal have been choppy since they plunged as much as 20 percent in September from the record highs they hit early in the month.

Strong physical demand after Friday's price decline and as Chinese buyers returned to the market after a week-long holiday also helped support prices, as did worries that the latest plan to tackle the euro zone debt crisis could prove short-lived.

"At the moment, near-term direction does look very, very mixed, but on a longer term view, you still have to be positive given what we are seeing coming out of the physical markets, particularly in Asia," said Credit Agricole analyst Robin Bhar.

"Clearly (recent) very extreme volatility called into question gold's role as a safe haven, which should be characterized by low risk and low volatility," he added. "But as a form of insurance (it is attractive)."

"People are thinking the newsflow is only beneficial in the short term. Europe still has to get its act together on a much longer-term basis."

Unusually for an asset that usually benefits from losses in assets seen as higher risk, like stocks, gold climbed along with equity markets on Monday. European shares were lifted by the Franco-German plan to tackle the debt crisis. .EU

The fillip lent to risk appetite by the proposal also lifted the euro 1 percent versus the dollar, while oil climbed. A weaker dollar tends to benefit gold, as it makes dollar-priced commodities cheaper for other currency holders.

France's Sarkozy said he and Merkel were in "total agreement" on the recapitalization of European banks, even though officials in Paris and Berlin have made clear in recent days that the countries are far apart.

"While a detailed plan was lacking, we view any progress on bank recapitalization as a positive for gold," said UBS in a note. "Typically liquidity concerns and funding issues are not gold's friends."

U.S. gold futures for December delivery were up $24.80 an ounce at $1,660.60.

MONEY MANAGERS CUT BULLISH BETS

Data released by the U.S. Commodity Futures Trading Commission on Friday showed money managers, including hedge funds and other large speculators, scaled back bullish bets in gold futures and options for the eighth time in nine weeks.

China's financial markets reopened after the week-long National Day holiday. The popular gold forward contract on the Shanghai Gold Exchange rose more than 1 percent to 341.90 yuan per gram, or $1,674.50 an ounce.

"The decline in gold prices recently has attracted retail interest as China's Golden Week holiday draws to an end," said HSBC in a note.

"Dennis Lau, director of sales operations for Chow Sang Sang Holdings Intl, the largest listed jewelry maker and retailer in Hong Kong, mentioned in an interview that more gold buyers are attracted to the gold markets this year following the plunge in gold prices," it added.

"Sales during Golden Week were 50 percent higher from a year earlier as buyers took advantage of the price decline. Due to positive retail buying, we remain upbeat on gold prices."

Premiums on gold bars in Hong Kong remained around $3 per ounce, as physical stockpiles were running low, said dealers.

Other precious metals also benefited from the weaker dollar, with silver up 2.2 percent at $31.83 an ounce.

Among the more industrial precious metals, spot platinum was up 1.8 percent at $1,512.49 an ounce, while spot palladium was up 4.1 percent at $606.85 an ounce.

(Additional reporting by Rujun Shen; Editing by Alison Birrane)

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