Gold Fundamental Analysis for April 21, 2011

Gold continues the upside rally and surged above the psychological $1,500 barrier to set a new all time high at $1,505.65 per ounce as the weakening dollar triggered gold gains alongside other commodities.

The gold’s rally alongside currencies, commodities, and equities confirms the cautious sense of optimism in the market as the precious yellow was still demanded as a hedge against uncertainty. The dollar’s slump was big support with uncertainty over the sovereign debt in the nation alongside the European debt woes.

Asia demanded the metal as a hedge against inflation and the combination proved to be record-breaking for the yellow metal. There is still lingering uncertainties that are exceptionally high of a rally and this week alone with the heavy reversal from bearishness to bullishness across markets, it is only clear that gold haven demand is needed.

The volatility will remain high especially as gold attempts to hold onto the $1,500 grounds. With the end of the week early on Thursday profit taking might be seen and that should be eyed for gold, especially ahead of a long weekend and after reaching a new record with consecutive sessions of gains.

We have data from Europe tomorrow that might affect the sentiment with the German Confidence at 8:00 GMT followed by UK public finances figures and retail sales at 08:30 GMT.

From the US at 13:30 GMT the start will be with the weekly jobless claims and expected with a slight decline to 393 thousand from 412 thousand the previous week, which should be good for the market and for the positive sentiment and pressure the dollar further south.

At 14:00 GMT we have the leading indicators for March and expected to slow to 0.3% from 0.8% signaling slower recovery expectations over the three-to-six coming months. The Philadelphia Fed Index is also expected downbeat with a strong drop to 36.0 from 43.4 which might weigh on the market and trigger dollar gains.

The dollar rise might pressure gold as it works opposed to the dollar despite its demand as a haven; we saw gold gains with equities and commodities which accordingly might set it at risk from the dollar correction and accordingly we expect high volatility and fluctuations for Thursday before investors leave for a long weekend.

(Source: http://www.commoditiesmansion.com/fundamental-analysis/gold-fundamental-analysis-for-april-21-2011/)