South Korean Central bank buys 500,000 oz. of gold

Even though the South Korean Central Bank confirmed that it bought over 500,000 oz of gold in the month of July to add to its reserves, the yellow metal and the broader precious metals complex are still feeling heavy this morning.  In yesterday’s FOMC statement, the Fed once again failed to impress the market with its rhetoric.  Many participants had positioned themselves long the metal in anticipation of a bullish Fed statement that would finally allow gold to break through the key $1,628 resistance area.   With the Fed failing to explicitly mention QE3 though, this never came and gold has sold off accordingly.  Their wording in this meeting, and since the end of QE2, has continued to impress the same notions of taking further action when appropriate and “maintaining low interest rates for an extended period of time”.

In the European session overnight, ECB President Mario Draghi disappointed investors as well.  After claiming last week in London that he would do “whatever it takes” to preserve the euro, in today’s meeting he failed to outline specific ways of remedying the situation.  He broadly stated that governments should be ready to shore up liquidity but didn’t mention how this would be accomplished.  The market didn’t buy into his commentary and assets from equity bourses to commodities are all in the red as a result.  Gold is back on precarious footing and the downside seems the more likely scenario in the short term.  Should it close below $1,600, the next area of support comes from a four point trendline at $1,565.