Gold shed more than 30$ from its price in recent days settling around 1,108$, as Greek debt woes and lower risk appetite loomed. Although in the FX arena the Dollar trade rather stabilized with the Euro and the Sterling rebounding from their lows Gold remained under pressure. China has been a dominant factor in the latest Gold selloff releasing a statement from Chinese officials that they prefer to buy US debt over Gold. China as the world’s largest Gold producer and the holder more than 2 Trillion Dollars in reserves has a rather strong effect on Gold sentiment. Such a statement from China shacked confidence of Gold buyers pushing them to trim profits. In addition ETF holdings one of the strongest indicators of Gold demand also pointed weakness for Gold with figures showing softening demand for the Metal.
Sentiment for the metal eases- Usually correlation between Dollar strength and Gold performance is in negative divergence meaning Gold price would move higher when the Dollar was falling and the other way around. One of the strongest arguments of Gold buyers when Gold reached to its record above 1,200$ was that Gold price has in fact risen in all currencies terms thus proving Gold is not driven purely by a weaker Dollar but by strong underline demand. The current price movements show that when most currencies edged higher against the Dollar Gold continued to slide lower, suggesting fundamental weakness is behind the recent fall in Gold price. In our latest review on the metal we have suggested the possibility of a Gold rebound and indeed after a rather volatile trade Gold edged from 1,124$ and topped out around 1,144$ an ounce, a 20$ gain. However with the possibility of china moving into more tightening and Gold falling below the support of the bullish trend line at 1,110$ we suggest cautiousness with the possibility of Gold resuming its major bearish trend rising.
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