Commodities | Apr 27 2007
By Greg Peel
The last five weeks have seen massive sales of physical gold by European central banks under the Washington Agreement. Over the past week, two banks sold 17 tonnes into the market, reports Blanchard & Co. This brings to 76 tonnes the amount sold over the five week period.
The only time in the last two years the market has seen such a quantity of gold sold in such a short period was in may last year, when the gold price overblew and subsequently fell from US$730/oz to US$550/oz. Yet Blanchard notes that the gold price has actually risen US$50 this time in the face of the European sales.
On that basis, Blanchard suggests there is strong evidence to suggest that as soon as this selling pressure moderates, gold must burst through the US$700/oz mark. There must be significant demand if the market can absorb 76 tonnes and stay strong.
US$700/oz is proving formidable resistance. The gold price slipped once more last night triggered by a slight rebound in the US dollar. But gold watcher Dennis Gartman notes further that gold is also pushing up against 500 euros per ounce and 700 Canadian dollars per ounce, so there are significant resistance levels all around.