Potential for further downside in gold remains exposed

After trading sideways for the better part of yesterday and overnight, gold has come under strong selling pressure this morning, weighed down by a stronger dollar and an apparent lack of interest from investors. Physical demand is fairly robust at these price levels, although support is not what it used to be, especially with Indian buying still relatively lacklustre as participants contemplate how to cope with the higher import duties.

With physical Gold demand not at full strength and waning investor enthusiasm, the potential for further downside in gold remains exposed. This potential downside could be heightened by US data flow and scheduled comments from Fed representatives (Tarullo and Bernanke) if either event should raise concerns over the Fed’s commitment to extended monetary accommodation.

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