Gold continues to edge higher in both dollar and euro-terms

Gold continues to edge higher in both dollar and euro-terms. We still favour euro-gold to outperform dollar-gold in the next few weeks. Investment demand is still driven by Euro-zone debt problems which remain at the forefront – the 5y CDS for Portugal, Spain and Italy is still rising.

Gold above $1,385 has attracted physical metal selling which may provide some resistance as we head towards $1,400. We expect physical selling to turn into buying should gold decline towards $1,360 again. We continue to expect gold physical demand to prevail on dips into January - Indian demand should remain positive until at least mid-December on the back of wedding season.

We also still have the festive seasons in the Western Hemisphere as well as Chinese New Year. In 2011 Chinese New Year is on 3 February.

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