2011-04-12

Gold have run into some light selling into the start of this week


After ending last week on a high note, Gold have run into some light selling into the start of this week. Market participants are tentatively seeking out riskier positions, which has reduced safe-haven demand for precious metals. In addition, after the recent rally some investors are starting to feel that precious metals might be overbought (especially silver), which has led to some profit-taking.

Once again, with not much in terms of data flow today, comments by Fed members, this time Dudley and Yellen (scheduled to speak at events later today) may prompt some activity in Gold markets. Should any comments increase speculation that Fed members are becoming increasingly polarised on the issue of monetary accommodation, we could see volatility in Gold. We still foresee that as the deadline for QEII draws near, increased uncertainty and speculation among market players concerning the possible paths the Fed might follow could result in increased volatility in Gold prices.

For the week ahead, the release of the Fed’s Beige book and US inflation figures will most likely be closely watched. Here too markets will focus on any indications that the Fed might be contemplating an early exit to its planned $600bn in monetary accommodation. To this end signs of a strengthening US economy or rising inflation might darken the outlook for continued
monetary accommodation and abundant global liquidity. Given the strong positive relationship between Gold and global liquidity, this could shake confidence in the complex, prompting some downside for prices.

Gold support is at $1,457 and $1,447. Resistance is at $1,477 and $1,486.

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