Physical demand for gold remains strong

Gold have succumbed to the general negativity in markets, prompted by fading optimism regarding the Eurozone, and deepened by disappointing Q3:11 Chinese GDP growth. Starting in New York yesterday, liquidations across assets have continued into the European open this morning, with sell-offs in precious metals particularly acute in Asian markets during overnight trade.

Of concern, is that gold are failing to garner much interest from safe-haven demand, which reminds us of several weeks ago, when cross-asset liquidations saw gold and silver lose considerable ground. Once again it appears that regardless of the general risk-off sentiment, precious metals look set to suffer the same fate as equities and other risky assets. In addition,
as highlighted yesterday, we can expect a period of heightened volatility in the build-up to this weekend’s EU summit.

Physical demand for gold remains strong, and as we’ve seen in the past few weeks, we foresee significant interest emerging below $1,650. Therefore, we remain confident that a sustained fall below this level is unlikely, although a temporary dip towards $1,600 could be on the cards if the speculative market continues to shun gold.

Gold support is at $1,651 and $1,643. Resistance is $1,682 and $1,704. Silver support is at $30.79 and $30.55, resistance is at $31.97 and $32.90.