2011-03-31

Volatility in Gold markets as the QEII deadline of June draws near


Gold in particular, were buoyed by disappointing US consumer confidence numbers. The Conference Board’s measure fell to 63.4 in March, from a revised 72.0 in the previous month. Given that expectations were already quite low at 65.0, this result proved particularly disheartening. As an indication that the US economy was still fragile (consumption expenditure
accounts for 70% of GDP), the consumer confidence figure would ease worries over a premature exit from the Fed’s monetary accommodation. Given the strong positive relationship between global liquidity and precious metals (especially gold), this is supportive of the complex.

However, subsequent comments by various Fed members shows that the FOMC might be increasingly polarised on the issue of the timing of monetary tightening. Such uncertainty and increased speculation, could spark a rise in volatility in Gold markets as the QEII deadline of June draws near. Physical buying of gold has been relatively quiet overnight, dampened perhaps by speculation that India is considering regulatory changes to commodity imports.

Gold support is at $1,412 and $1,405. Resistance is at $1,425 and $1,430.

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