More Glitter for Gold?

Spot Gold (XAU) has had some rough sledding of late, largely staying between the mid- to lower Keltner Channels, and moving below the 61.8% Fibonacci retracement level on an intraday basis, although the closes prior to yesterday have held above it. Moving average support remains some distance away, and generally, this looks more like a chart that is rolling over than one that is coiling for a retest of the 1921.17 high.

Still, it’s an uncertain world, and there are rumors today of Asian central bank buying. This is helping to keep a bid under the metal in this session, as is an article in a Swiss newspaper noting that there is a referendum under way which if passed will require the Swiss National Bank to hold a minimum of 20% of its reserves in Gold, up from 16% currently.

In addition, the SNB will need to periodically need to buy Euros against the Swiss Franc in order to keep the cross rate above the 1.20 floor it has established, which will increase its reserves; again, assuming passage of the referendum, this will necessitate buying more Gold.

In any case, this illustrates the notion that changes in market fundamentals tend to get discounted, and reflected in the technical picture, very quickly. The vote on this won’t take place until 2013, but it’s encouraging buying even within what appears to be a reasonably strong downtrend. The SNB, parenthetically, has been selling off large amounts of its Gold holdings; the estimate is that it would have an additional CHF 75 billion ($96 bn) in its coffers had it maintained its full stock of the metal.There are times when “buy and hold” is best.