Gold and silver prices are moderately lower in early-afternoon US trading Thursday, with gold notching at a three-week low. The precious metals are pressured today by a solid rally in the US dollar index, which also hit a three-week high. Some technical selling is also occurring in gold and silver, as their near-term chart postures have deteriorated recently. February gold futures were last down 4.20 USD per ounce at 1,279.80 USD.
The dollar is still relatively strong, but keep the price of gold below the key threshold of 1,300 USD per ounce. Gold still faces short-term headwinds and is only one of the beneficiaries of renewed interest for safe havens from market volatility.
Gold reversed its intraday trend following the European Central Bank meeting and Draghi’s press conference. It was moving with a bearish and bottomed at 1,276 USD (January low) and then bounced to the upside rising back above 1,280 USD.
Currently, there is a bullish tone but still in the range that has been in place since the beginning of the week, between 1,276 USD and 1,286 USD.
Gold prices continue to trade sideways but was unable to get above the 20-day moving average which is seen as resistance near 1,285 USD. The next level of target support on the yellow metal is seen near the 50-day moving average at 1,255 USD.
Technically, February gold futures bulls still have the overall near-term technical advantage, but are fading and need to show fresh power soon. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at 1,300 USD. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at 1,250 USD. First resistance is seen at this week’s high of 1,286 USD and then at 1,292.20 USD. First support is seen at today’s low of 1,275.30 USD and then at 1,270 USD.
Meanwhile, the March Comex silver was down 0.075 USD at 15.30 USD per ounce.
Gold and silver traders continue to seek out fresh news to drive their markets.
New Wave of M&A in the Bullion Industry
Just a few weeks ago, Barrick Gold merged with Randgold Resources. The 18.3 billion USD deal has created a sector-leading miner owning top gold mines and the largest reserve base among its peers. Initially, the new company had a market capitalization of more than 23.75 billion USD.
And a few days later, another news shook the bullion industry. Just a few days ago, it was revealed that Newmont Mining would be buying Goldcorp in a massive 10 billion USD deal. The resultant company will be the world’s largest gold producer by the number of ounces mined (about 8 million ounces annually), larger even than “New Barrick” (about 6.6 million ounces per year).
These two deals may be just the start of a big shake-up in the bullion industry. After all, the sector desperately needs consolidation. The consolidation may improve the situation of the sector, but it will not affect the gold prices, set in the international markets in London and New York. Gold production costs may fall, but gold bulls should not worry – costs do not drive prices.