Gold Fundamental Analysis March 27, 2012, Forecast

By FXEmpire.com

Analysis and Recommendations:

Gold skyrocketed up 26.95 to trade at 1691.75. Early last week, as prices fell, and investors began jumping back into the markets, we predicted that Gold might have one more shot at the 1700.00 level before collapsing. Gold should now begin to fall, after the markets recover from Mr. Bernanke’s speech.

His mere mention of the words monetary policy or monetary easing sent the dollar falling and gold climbing.

Gold began to climb after U.S. Federal Reserve Chairman Ben Bernanke said the central bank’s ultra-low interest rate policy can help the labor market, but warned that faster economic growth was crucial to ensuring further recovery.

The improvement in the labor market since last fall may only be a reversal of large layoffs during the recession, and further improvement may depend on faster economic growth.

Bernanke’s speech “reiterated themes that Federal Reserve policy makers have used to justify policy accommodation since last summer,” wrote economists at Nomura Global Economics, who said the arguments used by Bernanke — largely pointing to weakness in the labor market despite some recent signs of improvement — support further policy action.

Mr. Bernanke is scheduled to speak again on Tuesday, we will see where Gold trades after his address tomorrow.

Economic Data affecting the EUR, CHF, GBP and USD March 26, 2012 actual v. forecast

EUR	German Ifo Business Climate Index	109.8	109.7	109.7
EUR	German Current Assessment	117.4	117.0	117.4
EUR	German Business Expectations	102.7	102.6	102.4

Just a heads up since gold is volatile and will react to most economic indicators we will begin to post the daily calendar with events that could affect the price of gold. The gold price is sensitive to a number of scheduled U.S. and Euro area macroeconomic announcements–including retail sales, non-farm payrolls, and inflation. Gold’s high sensitivity to real interest rates and its unique role as a safe-haven and store of value typically leads to a counter-cyclical reaction to surprise news, in contrast to their commodities. It also shows a particularly high sensitivity to negative surprises that might lead financial investors to become more risk averse.

These results have a number of implications. To reduce the uncertainty of the return on gold transactions, traders may wish to time their orders flow so as to avoid the release of information that has been shown to affect prices. For longer-term market participants, these results provide confirmation of the pro-cyclical bias of many commodities and gold’s role as a safe-haven during periods of economic uncertainty.

Economic Events Scheduled for March 27, 2012

All Day G7 Meeting

The G7 meeting is the meeting of the finance ministers from the group of seven industrialized nations that are the United States, Japan, Germany, France, United Kingdom, Italy and Canada. The meeting takes place several times a year to discuss economic policy. Traders should pay close attention to this event as it might bring a new dimension to the markets.

07:00 EUR GfK German Consumer Climate 6.2 6.0

The Gfk German Consumer Climate Index measures the level of consumer confidence in economic activity. The data is compiled from a survey of about 2,000 consumers which asks respondents to rate the relative level of past and future economic conditions.

11:00 GBP CBI Distributive Trades Survey -4 -2

The Confederation of British Industry (CBI) Distributive Trades Survey (DTS) measures the health of the retail sector. The reading is compiled from a survey covering 20,000 firms responsible for 40% of employment in retailing. It includes measures of sales activity across the distributive trades. It is a leading indicator of consumer spending. The figure is the difference between the percentage of retailers reporting an increase in sales and those reporting a decrease.

13:00 USD S&P/Case-Shiller Home Price Indices -3.8% -4.0%

The S&P/Case-Shiller Home Price Indices released by the Standard & Poor’s examines changes in the value of the residential real estate market in 20 regions across the US. This report serves as an indicator for the health of the US housing market. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative, or bearish.

14:00 USD Consumer Confidence (Mar) 70.0 70.8

The Consumer Confidence released by the Conference Board captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. Generally, a high reading is also positive for the USD, while a low reading is negative.

14:00 USD Richmond Fed Manufacturing Index (Mar) 18 20

The survey including information on shipments, new orders, order backlogs, and inventories conducted by Federal Reserve Bank of Richmond provides information on current activity in the manufacturing sector (mailing 220 business organizations). The industry inflation can be seen from the survey. Generally speaking, a high reading appreciates (or is bullish for) the USD, whereas a low reading is seen as negative (or bearish for) the USD.

16:45 USD Fed’s Bernanke Speech

The Fed Governor Ben Bernanke was born in 1953. He graduated from Harvard University and a Ph.D. in economics in 1979 from the Massachusetts Institute of Technology. In 2006 he became the Chairman of the Federal Reserve System. He gives a press conference as to how the Fed observes the current US economy and the value of USD. His comments may determine a short-term positive or negative trend.

Government Bond Auctions (this week)

Mar 26 09:10 Norway Nok 3.0bn NST 474 3.75% May 2021 Bond

Mar 26 10:30 Germany Eur 3.0bn new Mar 2013 Bubill

Mar 26 15:30 Italy Details BTP/CCTeu auction on Mar 29

Mar 27 09:10 Italy CTZ/BTPei auction

Mar 27 08:30 Spain 3 & 6M T-bill auction

Mar 27 17:00 US Auctions 2Y Notes

Mar 28 09:10 Italy BOT auction

Mar 28 17:00 US Auctions 3Y Notes

Mar 29 09:10 Italy BTP/CCTeu auction

Mar 29 17:00 US Auctions 7Y Notes

Originally posted here