By Jon Nadler
The lowest price in three months, achieved after Tuesday’s brutal sell-off, lured some price-conscious Indian buyers back to the bazaars overnight. It might even turn out to be the case that July’s gold sales in India end up being the best of the year thus far. As we have often noted, it is [almost all] about price, when it comes to that demand (that, and the calendar, but in that order). In the West however, the trend towards lightening up on the previously huge gold positions and seeking ‘greener’ pastures in other assets remains intact, albeit even as of the latest tallies gold still shows outperformance versus the stock market.

For now, the bears hold the market’s flag firmly in hand, and bullion appears to want to be heading towards or below its 200-day moving average of around $1,149 an ounce. Such a direction appears to receive confirmation in one of Barclays Capital’s latest market observations: “Taking a closer look at the price action from the June 21 highs (near) $1,265, the decline can best be described as corrective... with downside targets seen to the 200 day average, now $1,147,"

“Gold is in full collapse, as people exit the gold bug bus,” wrote analyst David Lutz, on Tuesday. Meanwhile, Michael Shaoul, CEO Oscar Gruss brokerage, notes that “the fact that gold’s weakness comes at a time that the USD is losing ground against other major currencies means that the USD price masks the losses measured in other currencies. The price of gold in AUD (our favorite neutral measure of price) has broken down through multiple support levels in recent days and at $1,297 is now over 15% below its 2010 peak of $1,527 … We remain concerned that an overcrowded trade such as this has the potential to unravel quickly if participants seek to trim positions.

Market Beat warned on Tuesday that the “concern isn’t over the savvy types who know full well that this is a bubble and have been riding it for as much gain as they can take. (Yes, we’re looking at you Mr. Soros.) Our concern is for the people who are buying the yellow rock because it’s been hawked to them incessantly on TV. Mark our words, when this thing pops a lot of people who can’t afford it are going to get hurt.”

This morning’s opening gold act in New York was meek, at best. After having tried for a bounce back towards the $1170 level overnight, bullion opened with about a 60-cent gain and was quoted at $1162.20 on the bid side. Silver was off by 4 cents at the midweek session’s opening, quoted at $17.60 the ounce. Platinum eked out an opening gain, rising $7 to start at $1534.00 while palladium remained static at $466.00 the ounce. Rhodium showed no change at $2230.00 after yesterday’s small loss of $20.

Market focus this morning centers on durable goods orders in the US. Not so good, that number. It sank rather swiftly in June, tallying a 1% loss. That is diametrically opposed to the expected 1% gain among polled economists. It also happens to be the largest such drop since one year ago. Not a dollar-helping number, that. In the wake of the number, the greenback showed only a modest 0.07 decline on the index (at 82.09). The euro continued stable at just under $1.30 vis a vis the US currency. Oil was flat.

Maybe this day’s statistic, and the fact that it could possibly be a precursor of a not-so-hot GDP figure to be reported on Friday, will give gold a near-term reason to undo the string of losses recorded over recent sessions. Recall that the precious metal had found excuses to drop in new home sales, consumer confidence, the lack of bad news from Europe, etc. Then again, if the overriding sentiment by Friday’s markets’ closing time is that deflation is starting to grip the US economy’s neck with a firming hand, who know? Asset liquidations could still ignite, a la 2008.

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