Gold enjoyed a relatively good US session

Gold enjoyed a relatively good US session, although momentum did slow in overnight Asia trade. For the most part, the upside was attributable to bolstered investor confidence, owing in part to the IMF announcement that it is planning to extend its lending capacity by $500bn. Despite the US and UK saying that they would not commit to such a move, the market took heart that this would help ease the fiscal problems facing the Eurozone.

This renewed confidence has seen markets adopt a cautious risk-on stance, pulling the dollar down and consequently easing downward pressure on precious metals and commodities in general. Another leg of support for gold (and for the other precious metals as they follow) has been the consistently strong physical demand out of China as buyers gear up before the New Year holidays.

However, with today the last day of work for many Chinese, this support cannot be relied on over the coming weeks. Unless Indian buying fills the gap, which is unlikely given the relatively lacklustre activity we’ve seen over the past few days, we could see gold tracking the dollar even more closely as we move into next week.

Once again the effect of US data flow (housing, jobless claims, inflation, Philadelphia Fed survey) on market confidence and consequently the dollar, will dictate most movements in Gold prices this afternoon. It will be interesting to see how the complex holds up in Asia in the absence of Chinese participants.

Gold support is at $1,651 and $1,637. Resistance is $1,671 and $1,677.


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