Lower prices prompted some bargain hunting activity

Profit-taking on the week’s recent rally saw gold lose considerable ground on Thursday and Friday. The move down was exacerbated by a strengthening dollar, as sovereign debt woes plagued the euro and as better-than-expected jobless claims figures bolstered confidence in the US economy. Yesterday’s dip in gold was mirrored by the rest of the precious metals complex, although platinum’s move was not as extreme, due perhaps to a lack of recent speculative activity, but also the relative stability seen in the base metals.

Overnight, lower prices prompted some bargain hunting activity, led by the physical markets. Speculative action in the form of short-covering has also lent some support, while the agreement by European Union leaders, to replace the current emergency rescue fund with a permanent crisis finance program, has renewed confidence in the euro. The consequent dollar weakness
added to the upward momentum in precious metals prices this morning, though the metals are again back under pressure as we head into the afternoon, with prices continuing to yo-yo about.

Gold support is at $1,362 and $1,349. Resistance is at $1,389 and $1,400.

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