2011-06-04

Gold should remain robust


Gold remain range-bound ahead of the US non-farm payroll numbers. Apart from US payroll figures this afternoon, our focus is now shifting towards inflation and inflation expectations following the weak economic data the past few days.

Any slowdown in employment and growth, in conjunction lower inflation, could trigger broader concerns over stagflation. This may well favour demand for US treasuries. Greater demand for US treasuries and the ongoing Euro-zone debt problems may favor the dollar (consistent with our FX strategists view on the euro/dollar exchange rate). We also keep a close eye on Euro-zone CPI next week and the ECB meeting which could signal another rate hike soon. No rate hike from the ECB in coming months could see the euro give up some ground against the dollar.

However, while developments in coming days may favor the dollar, we believe demand for gold should remain robust.
Gold support is at $1,520 and $1,508. Resistance is at $1,545 and $1,557.

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