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Sunday, February 27, 2011

Investor's seeking to preserve wealth drives gold higher

Investor's seeking to preserve wealth drives gold higher : Further bullishness is expected for the precious metal as Libya's political unrest persists into another day. The precious metal is headed for the longest weekly gain in almost half-a-year as investor's hedge against inflation and seeking wealth preservation.

Further impact on gold prices will be seen as UK and USA release the secondary estimate for fourth-quarter growth. Analysts don't predict a revision for the contraction witnessed in UK of 0.5 percent, while the US economy to expand at 3.3 percent from 3.2 percent that was reported in the first estimate release.

The issue with UK will remain with price acceleration as inflation continue to threat economic recovery where it spikedto 4.0 percent last month while expectations signal that inflation will average out around 4.4 percent this year, before heading south to drop near the desired rate of 2.0 percent by 2012.

Three panel members in BoE favoured the need to increase rates, while one member favoured increasing the APF program in order to support the economy that contracted by 0.5 percent in the fourth-quarter of 2010. Meanwhile, five panel members preferred to preserve interest and the APF program at the current levels of 0.50% and £200.0 billion, respectively.

Nonetheless, safe haven demand managed to increase specifically since oil prices are expected to rise; therefore, hedging against inflation remains the main theme for trading in gold as higher oil prices usually are reflected in higher inflation levels.

Spot goldis traded near $1,405.36 an ounce, compared with the opening levels of $1,401.70 an ounce while setting a high of $1,409.76 an ounce, and a low of $1,400.20 an ounce. Gold futures dropped 0.58% or $8.200 to trade at $1,407.600 an ounce.

Technically speaking, the metal's trend remains to the upside as far as the support at $1,389.00 an ounce remains intact, while the 100-day MA support level is set at 1,374.00 an ounce.

Gold is nearing support at 1,400.00 an ounce (A correctional move), where if breached it will pave the way for the pair to test the above mentioned support level, but the general trend remains to the upside with targets set at 1,425.00 an ounce.

China and India remain the top two market movers as speculations have increased among investors. India is expected to increase its gold reserves, while China managed to increase the Reserve Requirement Ratio (RRR) by 50 basis points, for the second time this year by half percent as inflation in China spiked at 4.9 percent in January, up from 4.6 percent a month earlier.

In FX-markets, the euro inched higher in trading, reaching 1.3803 while the pound remained relatively close to the opening levels at 1.6130. For the latest updates PRESS CTR + D or visit Stock Market news Today

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