Commodity prices fell as major governmentbonds rose but weaker Eurozone debt slipped, pushing interest rates higher.

Tokyo's Nikkei index – up by 85% fromNovember– dumped more than 7% after new data showed a surprise contraction inChina's manufacturing sector.

Private "retail" investors have"abducted" the Japanese stock market, accounting for more than athird of recent volume, according to brokers quoted by the Financial Times.

"[Gold's] inability to hold the highsis bearish," says the latest technical chart analysis from Scotia Mocatta.

"[Wednesday's] intra-day rally isindicative of bargain hunting in gold rather than a change in trend," thebullion bank adds, pegging support at the April 2013 low of $1323.

Like Barclays Capital's analysts, Scotianow puts short-term resistance at yesterday's sudden spike of $1412.

Gold prices rose Thursday morning tobreach $1390 per ounce once again, recovering two-thirds of Wednesday's plungefrom that 1-week high – made as US Federal Reserve chairman Ben Bernanke wastestifying to the Senate on the likely direction of Dollar interest rates and quantitative easing.

Having warned against "a prematuretightening of monetary policy" however, Bernanke was then asked if the Fedmight start reducing its $85 billion in monthly QE purchases of government debtand mortgage bonds before Labor Day on Sept. 1st.

"I don't know," Bernanke replied.

Minutes from the US central bank's latestpolicy meeting also showed one participant wanting to reduce the level of QE"immediately".

"Not having the future support of theFed," says Edward Meir's note for INTL FC Stone, "will remove a majorprop for gold."

"It seems the market is now squarelyfocusing on the September 17-18 [policy] meeting for the Fed to make its move,"reckons ING bank's analysts.

"Together with expectations oftightening quantitative easing," says Mitsubishi analyst Jonathan Butler –also quoted by Reuters – "the general trend for a modest economic recoveryin the developed markets is going to fuel growth in the equity markets and theDollar.

"That should see gold coming underpressure."

"The momentum is strongly negative, "saysEdward Lashinski, global strategist at RBC Capital Markets in Chicago.

"The market understands that gold isno longer a safe haven."

On the supply side meantime, "Beingmore profitable is better than being bigger," said Jamie Sokalsky, CEO ofthe world's largest gold miner, Barrick, at Bloomberg's Canada Economic Summitin Toronto on Tuesday.

Also forecasting new record highs for the gold price thanks to central-bank demand and the stateof the global economy, Sokalsky mooted "divesting" some smaller,higher-cost mines to focus on more efficient projects.

In particular, the giant Pascua-Lamaproject in Chile – valued at some $8.5 billion, and already eating some $5bn incosts – has been delayed by environmental concerns, says Canada's Financial Post.

"Barrick is considering all itsoptions at Pascua-Lama," says the paper, "including outrightsuspension."

At current gold prices around 10% of goldmines globally will be making losses, according to Thomson Reuters GFMS data.

"We would initially expect the oldestmines closing," says a special report from Japanese trading house Mitsui'smetals strategist David Jollie in London, "as they are in many casescoming to the end of their operating life."

Gold mining companies are likely to avoidclosing newer projects "as long as possible," Jollie says. But if thegold price stays low enough long enough, "closures will happen."

Adrian Ash

Adrian Ash is head of research atBullionVault, the secure, low-cost gold and silver market for private investorsonline, where you can buy gold and silver in Zurich, Switzerland for just 0.5%commission.

(c) BullionVault 2013

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-- Posted Thursday, 23 May 2013 | Digg This Article