Gold Fundamental Analysis for April 12, 2011

Inflation threats in the world pressured investors to continue on saturating the prices of gold to reach a record high of 1,476.30 an ounce, while a big correctional move is expected to ease of pressure on the metal’s price.

Gold is expected to drop severely to return and trade near 1,420.0 an ounce and probably extend its drop to 1,400.0 and 1,390.0 as investors take advantage of elevated prices and seek profits. Nonetheless, a failure to breach 1,445.0 an ounce would pave the path for the metal to target 1,480.0 and then 1,500.0 an ounce as inflation reports will arrive from Germany, UK, and the Euro Zone.

The German consumer price index will be released Tuesday at 06:00 GMT with expectations that the final March reading remained unchanged at 0.5% and at 2.1 percent over the year. Furthermore, the CPI EU Harmonized index is expected to remain at 0.5% and 2.2% over the monthly and yearly basis respectively.

UK inflation levels continue to pressure traders to hedge against inflation, where the British economy will release its CPI monthly report at 08:30 GMT which is expected to show that inflation remained unchanged during March at 4.4% while the Core CPI to rise by 3.3%, down from the previous 3.4 percent.

The ECB hiked rates by 25.0 basis points, while the BoE preserved rates as members would await the upcoming inflation report that may add more pressures on the panel to hike rates and withdraw substantial amounts of stimulus money from markets.

Volatility extended on Monday due to lack of data from major economies while eyes move to the US trade balance on Tuesday at 12:30 GMT where the narrowing deficit is likely to do little in terms of direct influence on gold yet the prevailing dollar strength will keep the pressure on the metal.

(Source: http://www.commoditiesmansion.com/commodities-news/gold-fundamental-analysis-for-april-12-2011/)