Gold Update

Spot gold collapsing, now at $645.75/oz, at fresh lows for the day.

After breaking above the July 2006 high at $676 (Feb 21) to post a 7 mos high just under $690, the precious metal stalled, edged lower on profit-taking and then was hit by a fierce bout of unwinds in the wake of a purge of equity and carry trade positions.

Gold remains vulnerable to further downward corrections. Gold longs are looking at positive Dec/Jan Chinese import data, while gold shorts are looking at "the general turmoil in financial markets, worries about a US slowdown, and carry unwinds as the Bank of Japan tightens - and maybe also rising exchange inventories".

Should $650 decisively give way ($649.25 low o/n), market players will then set their sights on the $640/$642 zone, where gold bottomed out late January on several occasions.

It is also the 50% retrace of the 2007 low ($601.70) to high ($689).