Gold Strength Observed Over The Week But Capped On Profit Taking
Gold dropped 1 percent as the week drew to a close yesterday; this came on the back of the dollar strengthening versus the euro after rumours of an upcoming credit downgrade associated with major euro area nations hit the markets. Standard & Poor’s subsequent rating downgrade of a handful of euro zone economies consisting of France, Austria and others was actually unveiled as the markets were winding down but even the unconfirmed rumours earlier in the day motivated precious metal specs to take profits after the recent bullish upside movement.
This sovereign ratings news shook the financial markets and came after a small rally for the European single currency in what is the first major euro-zone event of 2012. EUR/USD actually dropped down to a low of under $1.27 as safe-haven flows dominated. The dollar is once again benefitting from the flow to liquidity and seems to currently benefit more than Gold in these “risk-off” scenarios. Despite the profit taking on Friday which resulted in a drop of 0.6 percent on the day Gold strength was evident on the weekly basis as the precious metal was still up 1.46% percent over the week and 4.43% on the month.
Chinese Gold buying adds to recent bullish sentiment
Some analysts partly attribute the recent rally in Gold to the major increase in Chinese buying of the precious metal. A recent Bloomberg article advised that Gold speculators are currently more bullish than they have been in two months on the news that China has imported more metal (102.8 metric tons in November which was valued at over $5 billion) from Hong Kong and an increase in the take up of U.S. bullion coins to a level not seen in over two years. China even topped India as the biggest gold jewellery purchasers during the 3rd quarter according to the World Gold Council.
Gold (XAUUSD) Daily Chart
Gold technical levels and recent statistics
- Current weeks range of 5714 is 59% of the Average over 26 weeks at 9604.
- The 1661.89 area is this weeks high and 50% retrace of 1802.54 – 1522.55.
- 1635.62 200 day SMA.
- 1604.85 weekly low.
- 1532.64 monthly bearish outside candle low.
- 1522.55 28 week low.
- 1762.97 swing high.
- 1802.54 swing high.
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Gold gave around 1.5 percent gain against Dollar this week but it was actually the weakest precious metal with Silver,giving a huge 8 percent increase with the risk on rally as QE came back into the news. Silver is now up an unbelievable 15 percent in the year to date!