The gold market collapsed

The week on the gold market began with a rapid drop in quotations of the precious metal, seriously startling the investors. A few minutes were enough for the pair XAUUSD to collapse to 1067.80 from 1133. After some time the metal managed to play back a large part of the losses. There is a speculation that such dynamics of the precious metal are due to the execution of a large sell order in China, however, a confirmation on words was not received.
Analysts of Fort Financial Services say that there are enough factors that seriously influence the price drop of the precious metal.
The precious metal market is kept on voltage by the approaching increase in interest rates in the United States, which in turn has a positive impact on the US currency. The gold price drop is also contributed by certain stability in the stock market in Europe after the resolution of the debt problem in Greece.
The gold market was negatively affected by the fall of the Chinese stock market. The amount of funds of the market participants remains limited; the purchase of the precious metal is not the best investment for the interest of profit.
Last Friday, the first time since 2009, was published the information on true gold reserves in China which, for the precious metal turned to a strong closeouts. A surprise for all became a relatively small increase in gold reserves in the past six years - only by 57%, which is 1 658 metric tons. Participants of the gold market expected to get the data exceeding the indicated figures. Experts believe that the buyer of the half of the physical gold in the market is China, providing constant demand. Focusing on the public information on purchases of precious metal in China, Bloomberg also predicted inventory levels three times higher than those that were announced on the previous day.
With high probability, the gold reserves are distributed to other national accounts, for example, to the welfare fund of the nation. China is the largest buyer of gold, with relation to this; the country is interested in the price drop for this good. The collapse of the stock market greatly undermined the Chinese economy, but the Chinese authorities still desire to make yuan a reserve currency. In October 2015 it is planned to review the decision on including yuan in the basket of SDR currencies. Until that time, China has to stock up on gold to the limit for a positive result. The period of price drop for the precious metal is the most favorable for the purchase of it.
It should be added that, probably, gold is no longer perceived by financial markets as a defensive asset and it also cannot be called a cash equivalents in a given situation. In addition, in 2011, Federal Reserve Chairman Ben Bernanke said that gold is one of the assets, but does not act as money. The ongoing events confirm the words of the representative of the Federal Reserve, besides they reflect the views of the majority of the heads of the Central Bank of the developed countries. However, one more opinion went public, which says that the Federal Reserve and the banks deliberately reduced the price of the precious metal in order to maintain the US dollar as a reserve currency.
Meanwhile, analysts of the company FortFS say, the fact that gold prices have now reached the minimum of 8 months, did not contribute to the additional interest from India and China - the largest consumers of the asset. Probably the buyers took the waiting position hoping for a further reduction based on the strengthening US currency.
How events will affect the gold rate will be reflected on the site.
MACD is in the negative zone and above its signal line. The price and the histogram move synchronically. According to the indicator the opening of only short trades is possible.
Stochastic oscillator is below the 50-th level. The% K crosses% D line from top to the bottom. A signal to open sell positions is generated.
Resistance levels: 1110, 1120, 1131
Current price: 1100.97
Support levels: 1096, 1081
Trading recommendations
The price reduction of the precious metal is restrained by support at the level of 1096. In the case of breakthrough, quotes will continue the downward movement to the level of 1081. The growth of quotations is limited by resistance at 1110. If quotations will be able to break it through, then the growth will continue in the direction of the next resistance level of 1120 and 1131.