Gold succumbed to some selling pressure from increased risk-taking

As largely anticipated, the Greece parliament has ratified the planned austerity measures. In the immediate aftermath of the vote,Gold succumbed to some selling pressure from increased risk-taking. However, with the opening of markets in the US, enthusiasm across the asset classes saw precious metals well bid. This enthusiasm for precious metals lost momentum in overnight Asian trade, as risk-on sentiment reduced the appeal of the traditional safe havens. As mentioned yesterday, we believe that upside for Gold, is still in the offing. With the distraction of the Greek vote out of the way now, the focus will now shift to today's PMI manufacturing data.

Our expectations regarding the PMI manufacturing data, specifically for China (which we have held since April), remain unchanged — given the strong seasonal patterns in PMI manufacturing data, combined with China’s monetary tightening, we would not be surprised to see, by the end of July, the PMI manufacturing reading indicating that Chinese manufacturing is contracting. As a result, we would look for the PMI data to confirm a decline today, followed by another decline next month.

Together with PMI data out of the US and Europe, which will most likely confirm the weakness of the global economy, this should reignite demand for the safety of Gold.

Gold support is at $1,501 and $1,494.