2011-01-25

Key to precious metals this week will be speculation surrounding Wednesday’s FOMC decision and the health of the US economy.

A poor start to the week for Asian equities (especially China) indicates lingering fears of increased Chinese monetary conservatism. Nevertheless, precious metals have done relatively well with a weaker dollar and relatively low prices prompting some physical buying in Asian markets. Going into the week, we don’t expect concerns over China to be as dominant as they were last week, especially for precious metals.

Key to precious metals this week will be speculation surrounding Wednesday’s FOMC decision and the health of the US economy. Data flow suggesting a stronger US economy might raise concerns over a possible scaling down of the Fed’s intended $600bn in bond purchases. While we think that a change in policy is highly unlikely at this time, investor worries could see a pull-back in precious metals, especially gold. We advocate buying dips off the back of positive US data flow.

Gold support is at $1,345 and $1,338. Resistance is at $1,357 and $1,361.

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