By FXEmpire.com
Gold Is Looking for Direction
Gold, that shiny metal that everyone loves, dipped lower on Friday retracing gains made during the week as the dollar firmed against key currencies, with the Euro falling out of favor due to worries over Spain’s financial health.
The commodity is still rose 2.4 per cent this week after a soft US jobs report last Friday and combined lackluster reports this week, stoked expectations for new quantitative easing measures. Although Chairman Bernanke seemed to sidestep monetary policy in his addresses last week. This week the FED will be quiet in preparation for their meeting in two weeks.
A report released on Friday showed China’s economy grew at its weakest pace in nearly three years in the first quarter denting risk appetite. Physical buying in Asia’s bullion market slowed due to higher prices, but gold-buying festival of Akshya Tritya in India in late April is likely to help bring in some demand from the world’s top consumer of the metal.
Comex gold futures are still consolidating in a very broad range waiting for direction. Prices pulled back higher but failed to sustain. As mentioned in the previous update, chances exist for a decline below psychological support at $1,600. It could even accelerate further towards $1,555-60 levels too in the coming sessions
Based on February data, the OECD composite of leading indicators points to potential turning point in economic activity in the Euro area and regained momentum in other major economies. This should be positive for commodity consumption demand, especially growth-commodities such as crude and base metals such as copper.
On the week, the base metals complex displayed divergent performance. All base metals – except lead and nickel – dropped. Copper prices were sharply down 5.1 per cent. Lead and nickel performed well despite the wider risk sell-off. All precious metals were down week-on-week, except gold which edged up by 0.2 per cent. The entire complex has been under pressure; but gold prices have gained some traction following suspension of strike by Indian jewelers. Concerns over Chinese slowdown impacted platinum and palladium.
On Friday, precious metals prices rose across the board as the dollar weakened on the day
While the macroeconomic setting is largely gold positive, investor interest is still muted and physical demand is not exactly robust. The yellow metal is waiting for some trigger to provide direction. It looks like gold prices may stay range bound in the near-term with slight downward bias. In today’s trading it is all about risk aversion as the USD holds strong. There is little in the way of eco data.
There is also overall optimism about global growth in the second half of the year and improvement in Chinese demand. It will be a fundamental market for the next few days reacting to news and rumor. Spain is most likely the focal point.
Originally posted here
