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Gold Price - This Week and Next

5/11/2012

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Last week gold posted its first monthly loss in four, with a steady decline throughout October to end up $49 lower.  November has started weakly with a $38 drop last Friday on the back of better than expected US jobs data.

We believe this is just a correction to the strong gains made in the late summer through to end of September and not the beginning of a more protracted corrective phase.

We expected the gold price to rise at the end of October after seeing support at $1700 on the 24th and 26th Oct – but then Superstorm Sandy rocked up and blew away all hopes as she shut down Wall Street for a few days and left many US traders with more important things to worry about.

The thin-volume trading caused by Sandy literally took the wind out of the market – once the early part of the week had effectively been “cancelled”, traders took to the sidelines to await the non-farm payroll data on Friday…and at one point it even looked like that would be delayed meaning there would have been no fresh impetus for traders.

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As it happened, the jobs data kicked off a glut of selling as the number of new jobs in the US rose considerably more than was forecast, leading many to lower their expectations of additional monetary easing and therefore a firmer dollar.

This week sees the US Presidential Elections on Tuesday – a win
for Obama is likely to have a positive impact on the gold price, whereas a win for Romney will have the opposite effect as he is less likely to continue with the current fiscal stimulus arrangements having stated a need for change within the Fed.

Later in the week we’ve got the interest rate decisions and subsequent press releases from the Bank of England and ECB, with a key vote happening in Greece on Wednesday regarding their ability and commitment to meet the austerity demands set out in their bailout package - as always (it seems these days), Europe continues to cause uncertainty across the globe.

Gold should see support at $1668, $1660 and $1630; with key resistance levels at $1695-$1700 and $1715-$1720.

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