Gold have been relatively range-bound

Gold have been relatively range-bound since end of last week, with reactions to developments on the Eurozone debt crisis contributing to volatility but providing little direction. An announcement by French and German officials that this weekend’s EU summit will not see a final agreement on plans for the European Financial Stability Fund (EFSF), has deepened the malaise across markets. It was however stated that next Wednesday should see a decision reached on the outstanding issues concerning the EFSF.

Until any decisive actions are agreed upon (and hopefully this will be Wednesday), we foresee a continuation of the current directionless trade, accompanied by heightened volatility. With apparently still so much confusion and uncertainty surrounding a possible plan to contain the region’s debt crisis, we don’t hold out much hope for anything that will renew confidence next
week.

Gold physical buying remains intact, but with the speculative market still appearing to position for further downside (as we see in the options market, with puts continually being bid up) and relatively thin trading volumes, it will be difficult for gold to make any significant break upwards. In addition, the dollar remains well supported, adding another drag on gold, and commodities in
general.

Gold support is at $1,603 and $1,582. Resistance is $1,645 and $1,666.

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