Gold Price 'Probing' Key Long-Term & Elliott Wave Level at $1080 as Baltic Dry Shipping Rate Sinks

[The Machine]

 

 

GOLD PRICES rose 1.6% in 3 hours Thursday afternoon in London, recovering all the week's previous losses to new 6-year lows to trade at $1083 per ounce as Western stock markets erased earlier gains and global shipping rates hit new all-time lows on the Baltic Dry index.

 

The US Dollar retreated towards its weakest level in a week versus the Euro despite Wednesday's minutes from the Federal Reserve's latest policy meeting showing what Reuters calls a "solid core of officials [backing] a possible December rate hike."

 

US Treasury bond prices rose again, pushing 10-year yields lower for the 7th session in 8 from last week's four-month high of 2.36%.

 

"After facing stiff resistance near a descending trend drawn since 2012," says a note from technical analysts at French investment and bullion bank Societe Generale, "gold is probing the lows formed in July at $1080.

 

"More importantly this is the upper part of the massive upward channel stretching back from the 1980s and [also] the 50% retracement of the 2000 to 2011 uptrend."

 

Saying that gold is "developing the fifth and terminal" move under Elliot Wave theory "of the down cycle that started in 2011," SocGen sees support at $1045 and then $1030 – gold's 2010 and then 2008 high points respectively.

 

Developed by US accountant Ralph Elliott in the 1930s to map the "rhyhmical procedure" in financial markets, Elliott Wave theory posits a predictable cycle of waves in prices.

 

"On weekly closing basis," SocGen adds, "a move below $1080 will be needed to further accelerate the downtrend."

 

With the Reuters/Jefferies CRB index of 19 key commodity prices losing 20% this year – "far exceed[ing] our expectations," according to bearish Goldman Sachs analysts – the Baltic Dry Index of shipping rates meantime hit a new all-time low today on its 30-year series, down by more than one-third so far in 2015.

"The main issue is the lack of demand for iron ore from China," says one shipping analyst.

 

"[This is] the most challenging market I have encountered in my 37 years in dry bulk shipping," said Petros Pappas, CEO of carrier Star Bulk (Nasdaq:SBLK) on an earnings call yesterday, which saw the stock drop 20%.

 

"What's happening is that in 2012 to 2014 the number of ships ordered overwhelmed the market," says CEO Peter Georgiopoulos of ship-owner Gener8 (NYSE:GNRT)

 

"The fleet is four times the size that it should be."

 

Overnight in China on Thursday, a 0.3% rise in Yuan gold prices saw trading volume in the Shanghai Gold Exchange's main contract drop to 1-week lows, but premiums above the global benchmark of London settlement held firm.

 

Equal to $3.50 per ounce, today's Shanghai premium offered a good incentive to importers over the last 12 months' average of $2.50.

 

"Investors still prefer gold as they don't have many alternatives," Bloomberg quotes Haywood Cheung, chairman of the Chinese Gold & Silver Exchange Society in Hong Kong.

 

"We expect [China's] gold demand to continue strengthening through the year-end...and [February's] Lunar New Year," says Industrial Futures Co. analyst Long Ling in Shanghai.

 

Silver tracked and extended the move in gold prices on Thursday in London, rallying almost 2% to near 1-week highs at $14.42 per ounce before easing back.