Lack of support from Asia due to the Lunar New Year celebrations

Gold had a torrid time last week, closing Friday at $1,610/oz, down $57/oz for the week. Much of this was owing to a market anxious about the lack of support from Asia due to the Lunar New Year celebrations. This concern was understandable since, as we have said before, a key point of support for the gold price in previous weeks has been unusually strong physical demand, mostly out of Asia. With this support absent, downside for gold was been opened up. However, we do foresee a recovery and maintain our preference for a strategic long position in gold, targeting an average price of $1,720 this year. This morning though, we have already seen some upside as Asian participants return.

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