Gold enters consolidation mode as longs exit the market

Gold enters consolidation mode as longs exit the market

London (Platts)--21Jul2006

Gold recovered more than $6 from its lows in early European trade
Friday as traders began to buy the dips. Key support was identified at $618/oz
and one Continental Europe-based trader said that gold came within a dollar of
this level.

Bullion fixed at $626.75/oz Friday morning down on its spot close in New
York at $631.40/oz and its previous fixing in London on Thursday afternoon at
$642.50/oz. Bullion began this week trading around $675/oz and has given up
$50 to settle back into its old trading range of $620-640/oz, the trader said,
with much of the unwinding completed by longs.

"We saw gold at $621/oz when Europe opened and now we're up at the
$627/oz mark -- it feels like we've been talking about this $620-645/oz range
for month," the trader said, adding: "There is a lack of liquidity because of
the summer and there is also a lack of direction as everyone is trying to make
a quick buck. When gold is up everyone is buying, when it is lower everyone is
selling."

The trader suggests that with the security issues in the Middle East,
bullion should be much higher. "The selling has been done by those who were
long and are disappointed with the current prices. On Monday we were at
$675/oz and it was a one way street [selling] Tuesday, Wednesday and yesterday
they let the traffic back and it was a two way street," he said.

The trader said that he had the impression that those with deep pockets
would be there to buy the dips now that the market was not as long and the
weak positions has been flushed out. He also suggests that "with the dovish
tone of the FOMC, a US dollar under pressure and all the geopolitical
problems I cannot see why gold cannot be above $700/oz before the end of the
year."

Analyst with thebulliondesk.com, James Moore, noted that "An absence of
economic data today will see traders focus on the newswires and currencies as
well as continue to absorb comments made by Fed Chairman Bernanke in his
testimony's to Congress Wednesday and Thursday."

Key support can be seen at $618/oz, with resistance seen at $645/oz and
again at $675/oz. The dollar was bid at $1.2663 compared with its last trades
in London Thursday at $1.2630.

--James O'Connell, james_oconnell@platts.com

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