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News of North Korea’s latest nuclear test helped gold rally in early Asian trading on Tuesday. But the “haven” bounce proved brief.
By mid-session the precious metal was again flirting with five-month lows.
Thin trading during the Lunar New Year holiday coinciding with another break below the 200-day moving average – currently $1,664 – help deliver the latest leg lower.
It also leaves bullion below the support level of $1,650 just as technical analysts will start worrying about the potential for a “death cross”.
That occurs when the 50-day moving average, now around $1,673, drops through the 200-DMA.
Traders may position to exploit such a move, thereby exacerbating it – and as such the death cross is considered a negative signal. (The clue is in the name.)
Gold bugs must be getting exasperated by this price action, especially given that central banks continue to be supposedly bullion-supportive in their ultra-loose policies.
But those who bought gold relative to yen have benefited from the focus on the Bank of Japan’s largesse. At Y155,000 an ounce, gold is only 2 per cent off its high.
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