2011-01-19

Eurozone debt crisis resurface - positive for Gold

Shaking off concerns over Chinese inflation and possible further monetary tightening, precious metals made tentative gains overnight. The recent prices piqued the interest of physical buyers, although with no trading in the US this was largely confined to Asian markets. Volumes were low, hence the relatively narrow trading range.

The lack of resolution after yesterday’s meeting of Eurozone finance ministers has seen investor concerns over a Eurozone debt crisis resurface. Officials met to discuss ways to improve the current rescue measures available to member states facing fiscal problems. No final decisions or commitments to bolster the €750bn rescue fund were made. These concerns should continue
to lend support to precious metals in the future, as investors are drawn to the group’s safe-haven appeal. For now though it seems as though risk appetite is unhindered, given the interest in European equities.

Appetite for risk is bolstering the euro, lending support across the commodities complex. The weakness in the dollar is broadbased hinting that this might also be attributable to unease over forthcoming US data flow. Today we have Empire Manufacturing, but more closely watched will be tomorrow’s release of housing start data, which is expected to show a deterioration in the
US property market.

Gold support is at $1,359 and $1,354.

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