Gold and Silver: Market Outlook

The tense situation around Iran escalated over the weekend after Iran and the USA made their statements. Iran reported about its intension to start uranium enrichment in an underground facility, which is capable of producing 3.5 and 20% uranium. In his turn, the head of Pentagon underlined that the USA will do its best to prevent Iran form blocking Hormuz Strait.

Today Angela Merkel and Nicolas Sarkozy are planning to meet in Berlin in order to discuss the new fiscal rules approved during the latest EU summit. These rules are expected to take effect in March 2012. The two leaders will probably consider the possibility of expanding the eurozone’s stabilization fund. However, there is little chance as Germany’s standpoint is known.

Friday’s US unemployment data came out better than expected. The non-farm employment increased by 200K jobs in December while the rate of unemployment declined down to the lowest level in 3 years.

China’s central bank keeps stimulating the country’s economy. In 2012 the bank is planning to lend 9-9.5 trillion yuan. Since May 2011 China’s import has been growing faster than its export. This year the balance-of-trade surplus is expected to decline below the level of 2005, $102B.

According to the CFTC report, big-scale investors increased their gold trades, both long and short ones - +1926 and +1743 correspondingly. For small-scale speculators, the figures are -865 and +1407.

Against this background, the trading volume of gold is slightly above the 30-day average, with gold moving in a narrow price range. Asia keeps showing higher demand for gold in advance of Chinese New Year. Dealers underline that the premium for physical gold increased from $1.3 up to $1.7 per ounce a week ago.

Forecast: According to the Department of Commodity Trading of Masterforex-V Academy, today gold may initiate a downtrend if it stays below 1617-1617.5. However, it also may test 1622. The probable targets of the downtrend are 1590-1589, and maybe 1575. Gold will resume its rally if the price consolidates above 1617.50.

As for silver, in order to resume its rally, it will have to break and consolidate above 29.30. Otherwise, a downtrend will be highly probable, with targets around 27.95-28 and even 27.45-27.30.

 

 

 

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