Gold Heavy Despite Europe Limiting Official Sales

The price of gold is off about 1% today, roughly matching the slide before the weekend. What is noteworthy about gold's heavier tone is that last Friday 16 European central banks agreed to limited their gold sales to about 400 metric tonnes a year for the next five years. This is 100 metric tonnes less than the current 5-year agreement that expires next month. There was talk in the market that the quote could have been raised by 100 metric tonnes. The IMF's planned 403 metric tons would appear to be included in these figures, though some had previously anticipated they would be viewed separately.

The bottom line is that there will be less official gold sales in the next five years than there has been in the previous five years. Most commentators expected to gold to rally on the news, but instead it has fallen 3% from last Thursday's high to today's low. The firmer tone for the US dollar and the continued increase in interest rates (which makes the non-yielding asset less attractive), may help explain gold's under-performance.

Gold tested the 50 day moving average, which comes just below $942 today and a break would signal a test on the late July lows and 100 day moving average near $927.50. In terms of foreign currencies, gold looks heavier in yen terms than euro terms.