By CommoditiesMansion.com
Gold’s trading next week will mostly be sideways with tendency to drop amid the expected rise of the dollar due to ECB and BOE rate decision that is expected to show tightening in policy which would depreciate the European shared currency.
The inverse relationship between commodities and the dollar will be activated but trimming the losses of the metal will be investors’ desires to take advantage of low prices along with MENA violence and Japan’s nuclear crisis that lures investors to target safety.
The ECB is expected to hike rates by 25.0 basis points, while the BoE is expected to preserve rates as members would await the upcoming inflation report that may add more pressures on the panel to hike rates and withdraw substantial amounts of stimulus money from markets.
The rate hike is expected severely depreciate the euro against the dollar in the final two-days of trading, as ECB aims to put a cap on rising inflation threats in the region, where the CPI flash estimate released last week showed that inflation levels moved to 2.6% from 2.4% in March, which is higher than the desired rate of ECB at 2.0 percent.Investors usually hedge against inflation by targeting gold.
Trichet press conference held at 12:30 GMT would reveal more information in regards of the upcoming period’s monetary stand. The rate hike aims to tackle elevated inflation levels that spiked in March at 2.6% from 2.4% in February, which is above the desired rate set by the bank at 2.0 percent.
Other data to hold significant impact on the metal will be released from Europe, where the final 2010 fourth quarter reading (Wednesday: at 09:00 GMT) may cause the metal to rise as the dollar would fall due to the expected appreciation of the euro where the final growth reading is expected to show that the 17-nation economies expanded by 0.3% in the quarter and by 2.0 percent over the yearly scale.
Therefore, Volatility is expected for the precious metal, but the metal would hold its trading between the support at 1,390.00 an ounce and the resistance at 1,445.00 an ounce.
Originally posted here
