Gold has broken short term support and is vulnerable to a test of 1560

Developments over the past week in both China and India could have bearish implications for the price of gold, according to a recent report by TD Securities.

In a note to clients this morning, precious metals strategist Steve Scacalossi wrote that “After the Christmas weekend the precious metals complex drifted lower. Gold opened right on it’s day highs and never looked back with a deluge of sell orders towards $1,607. This is somewhat surprising given news yesterday out of China where the head of research for the Peoples Bank of China was quoted as saying that the country should buy more gold when prices are relatively low. Support for gold is at $1,575 and then major support at $1,500 as per today’s chart.”

The TD strategist added that “In other news, China has restricted gold spot and futures trading to the Shanghai Gold Exchange and Shanghai Futures Exchange as part of efforts to crack down on illegal buying and selling of commodities.”

As for India, Scacalossi noted that ““Indian gold demand may drop as much as 50% in December after a plunge in the reminbi drives up local prices. Imports may total 35-40 tons this month compared with 70-75 tons a year ago as per the Bombay Bullion Association.”

From a technical perspective, he contended that “Gold has broken short term support and is vulnerable to a test of 1560.”