Gold Weekly Fundamental Analysis for May 30, 2011 – June 03, 2011

Gold ended the second consecutive week with gains on the shift in the market sentiment and high uncertainty and volatility.

Gold was steady the entire week above $1,500 areas and rallied to the highest in three weeks sustaining most of its gains on haven demand amid the deepening debt crisis in the euro area and the outlook for a slowing global recovery.

This week, the sentiment was very fragile and mixed amid choppy trading. The debt crisis surely had the lion’s share and the weak U.S. fundamentals were further downside pressure and to the dollar were merely added salt to injury.

Investors started their week with reaction to Fitch’s move on Greece’s debt rating as it was lowered by three notches. Standard & Poor’s downgraded Italy’s credit rating outlook to “negative” and then again Belgium saw the same fate but from Fitch this time with downgraded outlook from stable to “negative”.

Fears continued to mount with speculation that Greece might call an early election which the government denied. The Greek Cabinet passed new austerity measures and accelerated asset-sale plans to ensure its commitment to targets and try to avoid debt restructuring.

This was the first part of the equation, as the debt fears kept gold buoyed with upside support. On the other hand, fears over slowing global recovery was swinging between highs and lows with the inflow of data.

The data seen were generally downbeat, and especially from the United States this week, which fueled risk aversion at times and dollar gains, which in most times gold resisted. Nevertheless, to the end of the week the G8 comments that the global recovery is ongoing and gaining momentum which will offset the debt crisis eased the woes and heavily pressured the dollar to soften, as investors saw the U.S. data only weak on the dollar amid a steady monetary policy outlook.

As we start a new week, gold remains volatile and will be subject to heavy fluctuations alongside the mixed sentiment, yet we can surely see the upside support for the metal prevailing from the high uncertainty.

Gold’s past two weeks of gains somehow offset the metal’s sensitivity to the dollar and revived some of its appeal as a haven once again and accordingly it will be poised for more gains this week as the focus will remain on the euro area’s debt crisis with little data due for release and on the U.S. recovery with heavy data on queue all week leading to the infamous jobs report on Friday.

Source: http://www.commoditiesmansion.com/fundamental-analysis/gold-weekly-fundamental-analysis-for-may-30-2011-june-03-2011-2/