Precious metals take a dive

19 Jul

Gold ran head-first into a brick wall overnight and is down sharply today. This follows a couple of indifferent sessions which, nevertheless, appeared to offer some consolidation at higher levels following Tuesday’s sharp rally. Back then, gold surged past its old record high of $2,450 from May this year, going on to top $2,480. But, just as we saw in April, May and June, a decent run of gains was wiped out in a series of short, sharp slumps which appeared to come out of nowhere. This must be particularly galling for the bulls, as they have worked hard over a three week period to take gold to a new high from major support at $2,300. But gold is back under pressure again, briefly dipping below its first significant line of support at $2,400. As is often the case, the sell-off in silver has been even more aggressive. Having failed to get anywhere close to the key $32 level on its latest rally, silver turned lower on Wednesday. It is now 7% below Tuesday’s high and back below $30 per ounce. It has now retested support around $28.80, and this has held so far. But a deep and prolonged break below here would raise the risk of a bigger pullback to come.