Gold continued the see-saw pattern of the past week

Precious metals continued the see-saw pattern of the past week, falling significantly during early trade today, on the back of weaker Asian equities and a stronger dollar. With Eurozone debt fears again the focus of the market, gold and silver are in the middle of a tug of war between currency movements, in reaction to the sovereign debt issues in Europe, and from safe-haven
demand.

The euro has since stabilized and strengthened against the dollar heading into the afternoon, with gold also finding its feet following its initial sell-off. Although ahead of the G20 meeting the market appears to be taking risk off the table, we remain constructive on precious metals, especially gold and silver as increased uncertainty over Europe’s economy and safe-haven demand for precious metals helps to counteract the recent rebound in the dollar.

In addition, we expect physical buying to return as jewellery demand picks up as we enter the Indian wedding season.

Gold support is at $1,374 and $1,356. Resistance is at $1,404 and $1,422.

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