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Gold under selling pressure on Bundesbank comments

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Gold is under some selling pressure today as April Gold futures (gc02j) fell 2.1% to $293.60 per ounce on the heels of Bundesbank President Welteke, who said that Germany want to slowly sell some of its gold reserves and move into assets that offer a return beyond potential capital appreciation. Stocks as depicted by the Gold/Silver Index (XAU.X) are also under some pressure as this index falls 4.21% at $64.56.

April Gold Futures (gc02j) - Daily Interval

News out of Germany that Bundesbank may be selling some gold has the commodity under pressure today, but it is worth noting that the Washington Accord of 1999 limits gold sales by European central banks to 400 tons a year. Given that information, bulls don't need to think the sky is falling on their recent party, but should perhaps understand just how fitted retracement on the April Gold futures contract may have been traded by Bundesbank as gold edged into the upper level of a fitted retracement bracket that could well have been deemed a near-term "zone of distribution." If you think Bundesbank has a crystal ball telling them where gold prices are headed, then think again. Traders are traders and they'll use retracement techniques like we teach here. Look for some price firming at the $290 level.

Other "metals" stocks are under pressure today as both silver futures and copper futures see downside action. For "gold bugs" the $300/oz. level is a "magic number." In recent commentary, I've thought that the $0.73/pound for Copper was a key level. In recent sessions, Copper futures jumped to $0.75/pound, but selling has pushed Copper futures back down to $0.70/pound. With that, stocks like Phelps Dodge (NYSE:PD) $37.04 -4.0% and Freeport McMoran (NYSE:FCX) $14.93 -4.9% are seeing selling. Not long ago I turned bullish on shares of PD at the $35 level with a longer-term view of bullishness for the stock. However, current action for short-term traders should have them snugging up stops to profitable levels.

Jeff Bailey
Senior Market Technician
Option Investor

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