Gold bounced back modestly from yesterday’s large sell-off

Wednesday morning as the gold bounced back modestly from yesterday’s large sell-off. The gold price held firm while financial markets across Asia and Europe rebounded amid hopes that Greece will receive its next round of bailout money. Investors will also be keeping a close eye on Ben Bernanke and the Federal Reserve, as it begins its two-day FOMC meeting.

However, we remain neutral on gold for the time being. While gold thrives on financial market uncertainty, we believe that the funding issues at European banks in the face of a possible Greek default should remain a concern over the next few days, driving the dollar stronger. We continue to believe that in this environment, commodities will find it difficult to rally, including gold.

Gold extended its gains Wednesday morning, as gold price surged $30.80, or 1.7%, to $1,809.70 per ounce. The rebound in gold follows the sector’s large declines from yesterday. Monday’s weakness was fueled by considerable strength in the U.S. dollar, particularly against the euro currency. On Tuesday, however, gold and silver bounced back alongside the general commodities complex despite stabilization in the euro/dollar currency cross near 1.3670.