2011-04-01

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


Yesterday saw some weakness across the Gold, most likely in response to strengthening initial US employment numbers. Challenger job cuts data showed a 36.6% y/y fall (from a 20% y/y increase in previously). ADP figures revealedthat 201k jobs were added. This might’ve buoyed optimism over the US economy and strengthened fears over monetary tightening. Hawkish comments by Fed members Hoenig and Bullard added to these concerns. As highlighted yesterday, uncertainty and increased speculation concerning US monetary tightening, could see volatility in Gold markets increase as the QEII deadline of June draws near. This could be particularly acute next as investors attention will be drawn to the issue as the ECB prepares to hike rates.

For now, markets are more firmly focused on the unrest in Libya and concerns over the European debt situation. The results of the Irish Central Bank’s stress tests will be crucial to market sentiment. Consensus predicts that banks will have to raise an additional $38.7bn. A particularly disappointing outcome could see Gold benefit.

Gold support is at $1,417 and $1,405. Resistance is at $1,436 and $1,443.

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