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Hansen: Gold and silver markets get spooked

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Support for gold and silver has all but disappeared as precious metals hit a four year low. Saxo’s Ole Hansen says they were hurt as the FOMC announced an end to QE, the dollar rallied and so too did the S&P 500. The Bank of Japan’s surprise decision to boost its QE programme which weakened the Yen, also resulted in many sell stops in gold being triggered.

Hansen points out that for the two weeks up until 21st October, hedge funds and other investors cut their short positions in gold while increasing their longs. That they are now taking a more bearish stance is adding to the selling pressure, he notes.

Ole also says the technical outlook for gold has now deteriorated. He says the support levels to look out for are 1159 USD/oz followed by 1088 USD/oz. If this latter figure were reached he says it would complete a 50% retracement of the rally between 2001 and 2011. The coming week will be volatile, he says.

Ole Hansen is head of commodity strategy at social trading leader Saxo Bank