Gold

Towards the latter part of last week, the precious metal performed strongly. Prices found strong momentum through tracking the weakening dollar and rallied. Investors have begun to increase their exposure towards gold.

At the same time, rising prices are seen encouraging exit of some players ready to book profit.

It is unclear at this point of time whether Euro/USD has bottomed yet. There is a view the dollar weakness is a temporary blip. Should it be so, the upside to gold prices will be capped and the rally would be stunted. It is also known higher prices result in demand destruction, especially in price-conscious markets such as India. The metal will face tough resistance at $830/840 levels.

Clearly, the outlook for the yellow metal is bound up with prospective developments in the international financial system and movements in the dollar. Although gold’s haven status may have been somewhat exaggerated, diversification and haven demand may underpin prices for some time to come. Inflation is no more a major issue at present. Breaking the recent trend, should the USD appreciate against the euro in the coming weeks, it may prove negative for the metal.

According to technical analysts, the market is in a wait and watch mode. If gold remains below the confluence of resistance between 830/848, the outlook is bearish. In the near-term support could come at 803/805.