Gold is finding good support


Gold is finding good support. Our view remains unchanged. We believe that gold will continue to push higher in 2011. The metal has reached $1,500 and we expect it to consolidate above this level soon. We maintain our core long view on gold. While we believe gold would move higher in dollar terms, we expect it gold denominated in euros to outperform.

On the back of the unfolding debt crises in Europe, our G10 FX analysts last week updated their outlook on the euro/dollar exchange rate. We now believe we have probably seen the peak of the euro/dollar and that any rebound from here won’t see euro/dollar above 1.50. As a result, rallies in euro/dollar should be sold as we focus in on the longer-term target of 1.20 in the next 12 months.

Gold support is at $1,494 and $1,476. Resistance is at $1,519 and $1,522.

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