Gold Rallies Further in Subdued Trade
Gold closed the week up 2.85%, and just below three-month highs, at $1772 with mixed economic news and a Greek debt deal keeping volumes low but sentiment firm.
On Tuesday, after a two-day meeting, European finance ministers agreed to pass the previously agreed €130 billion bailout fund to Greece in time for it to meet its March deadlines on its debt repayments. Under the deal, Greece’s private creditors will be forced to take a hit of up to 75% on monies owed to them. The situation is expected to be top of the agenda during G20 meeting that takes place this weekend.
Over in the United States, existing home sales numbers came in stronger than expected and the four-week average jobless claimant count fell to a three year low. However, the European Union now expects the Eurozone countries to fall into recession this year, with growth for the European Union as a whole no better than flat to 0.3% growth.
Along with European Union warnings on economic growth, so, too, comes a downgrade from China. In a second downgrade in as many months, China now expects its growth in 2012 to be below 8%, from expectations nearer 10% growth made as recently as the last quarter of 2011.
Increasing tension in the Middle East, where Iran is posturing with a near nuclear capability, has led to a rise in oil price that threatens not only economic growth but also a rise in inflation.
Though the gold price has remained firm this week, gains have been made on thin volume as demand from India and China wanes. However, it would appear that Central Banks have been unwilling to sell reserves in large numbers.
In the United States, the US Mint has announced that American Eagle Gold Bullion sales are down by over a third in the first two months of this year from the same period last year.
With support seen at around $1760, and the 5-day moving average now well above its 50-day moving average, traders are bullish on gold both on a technical and fundamental basis in the short to medium term. A break above $1900 is considered very likely.
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