2011-06-24

Strong selling in gold above $1,550 in the physical market

Gold rallied ahead of Fed’s FOMC statement yesterday but the Fed delivered no surprises. While we continue to believe there will be no QE3, we also don’t discount the possibility completely. Following gold’s rally towards $1,560, the metal has since retraced on confirmation that there will be no further QE by the Fed. Despite this message from the Fed, our long-term view on gold remains unchanged — we believe gold will continue to push higher in 2011. Our core view on gold is driven not only by our observations in the physical market but also by continued growth in global liquidity, driven not so much by the Fed anymore, but increasingly by government borrowing.

There was strong selling in gold above $1,550 in the physical market. While the general trend in the physical market has been buying on dips, there seems to be strong resistance to a move above $1,550. We believe this resistance will not last long, especially if gold tests above these levels a few times over the coming days.

Gold support is at $1,540 and $1,532.

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