China currently holds around 1,064 mt of gold, compared to 8,133 mt for the US

Gold, along with most of the commodities complex, were hit hard in yesterday’s afternoon session, though all of the metals fared much better than the base complex. Concerns over Ireland's economic woes saw the dollar strengthen against the euro, triggering a bout of selling as the euro fell below the $1.35 mark. Profit-taking gave way to liquidation, with the triggering of stops exacerbating the sell-off.

As noted in the Base section, fears over Chinese monetary tightening have also been reignited, keeping precious metal prices subdued this morning. Of interest however, are reports that China is looking to gradually increase its reserves of gold and oil.China currently holds around 1,064 mt of gold, compared to 8,133 mt for the US. While the scope for China to increase its gold reserves are limited in the short term, it will nevertheless be interesting to see whether Chinese reserve holdings to gradually pick up over the coming months and years.

Gold has drifted sideways to lower during the morning, closely tracking fluctuations in the dollar. This pattern is likely to continue, heading into he afternoon, with the market waiting for clarity on Europe’s debt problems. Light physical buying is helping provide some support to prices however.

Gold support is at $1,323 and $1,309. Resistance is at $1,359 and $1,380.

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