Standard Bank Daily Gold Price Analysis for October 2, 2013

Standard Bank

The African Standard bank released its daily commodities analysis and report for October 2nd. The report analyzed the U.S. government shutdown consequences on the market.

The markets moved vigorously while some traders say “Everything will be ok at the end…” early on. The real question is when that “end” comes? Another question is how much damage it may pose on the U.S. economy? The answers to these question might wait till October 17, the U.S. debt ceiling deadline. The faster it worsens, the longer the shutdown goes on. Yesterday’s panic seemed to be lessening.

On the other side of the ocean, China now is on holiday, which might slightly weaken gold physical demand if the prices went lower. It was conformed as the price of gold dropped to $1,290 per ounce during U.S. trading hours yesterday. The Shanghai Gold Exchange (SGE) premium for gold was below $10 per ounce, after staying between $15 and $25 per ounce level. That might be another indication for physical demand on gold is slightly softer. It also might be an authority attempt to lower premiums.

The next date the market is waiting for is October 17. The U.S. government should start shutting down some services in an orderly fashion. The U.S. Treasury already said they are able to fund spending till October 17, after that they will more likely to hit the debt ceiling and wouldn’t be able to borrow further. Gold failed to see gains from this uncertainty despite the U.S. dollar weakening. That’s certainly not a bullish signal for gold. Gold price dipped to $1,290 level and U.S. equity markets closed higher.

The U.S. dollar current level couldn’t push gold prices through $1,350 resistance. China is heading for an extended holiday over the next week, which might lessen the physical buying support for gold price.

Industrial precious metals prices (Platinum and Palladium) are expected to be seen lower and gold to be higher as the uncertainty in markets continues. The uncertainty centers on failure to find a suitable solution to cut government spending. U.S. government shutdown means automatically cutting unnecessary spending for a period of time starting October 1st unless a solution is found. The deadline might extends to October 17th, as the U.S. Treasury stated earlier their ability to fund spending till that day.

Physical demand might start failing if gold price approaches $1,400 per ounce. Therefore, if the U.S. government came to an agreement on spending, gold price might give up gains from the current uncertainty.

COMEX gold future settlement was at $1,294.10, DGCX gold future was at $1,294.80, CBOT gold at $1,285.80 and TOCOM gold was at ¥4,067 per gram.

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