2011-02-22

Gold managed to reach a 7-week high

An escalation of tensions in the MENA region over the weekend has heightened the safe-haven appeal of precious metals. Protests continue in Bahrain, while demonstrations have been met with violence in Libya. Unrest is also beginning to surface in Morocco. Gold managed to reach a 7-week high, while silver rose to its highest level in three decades. Palladium reached a 10-year peak.

Adding to investor demand are also concerns over rising inflation in Europe and the emerging markets. While tightening of monetary policy in China was initially met with a knee-jerk reaction to the prospect of reduced global liquidity, it is now the implications that this has for the global inflation outlook that are being focused on. In addition, rising oil prices, on the back of MENA tensions, are further fuelling inflation worries.

The strong rally in prices has seen an increase in physical selling of gold. However, the drop-off in buying has been relatively sedate, indicating that physical demand remains in place.

Gold support is at $1,388 and $1,380. Resistance is at $1,399 and $1,401.

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