Eurozone’s plan to rein in ongoing crisis in the region has reduced gold’s safe-haven appeal

After making solid gains yesterday, gold has lost some ground this morning as optimism over the Eurozone’s plan to rein in ongoing crisis in the region has reduced gold’s safe-haven appeal. Silver has tracked gold down, while platinum and palladium have reacted more in line with industrial metals, managing to make some modest gains.

Continuing with the reaction to the news from yesterday’s EU summit, amid a lack of details and scepticism over the actual implantation of the proposed plan, we are wary about the current euphoria. The optimism could soon fade, which could see participants once again adopt a risk-off stance. However, given gold’s close co-movement with equities recently (the last few days excluded), it is uncertain whether the metal will benefit from a market returning to risk aversion.

For now though, there seems little that will derail appetite for risk, which should continue to see gold and silver trade on the backfoot today. A weaker dollar should at least limit any downside. In addition, physical demand should keep gold from slipping too far, although, as already mentioned, with India currently celebrating Diwali, this support is not what it usually is.

Gold support is at $1,694 and $1,678. Resistance is $1,727 and $1,743.