Doubts and uncertainty over the Eurozone are sure to resurface which could see renewed interest in especially gold

Despite, or perhaps as a result of thin trading volumes owing to the US Federal holiday on Friday, precious metals enjoyed the rally on the US market open. Not even a much-better-than-expected US consumer confidence could stall the upward momentum.

The University of Michigan gauge of consumer confidence rose to 64.2 according to preliminary estimates for November, a marked improvement on the previous month’s 60.9 and further allaying investor concerns that the US economy might slip into recession.

This morning, we’ve seen a slight pullback in gold as markets have greeted the formation of new governments in Greece and Italy with optimism. However, the weak performance of European equities belies this optimism and hints at some market scepticism concerning the ability and political will of both governments to enact measures that would satisfactorily contain their respective debt problems. In addition, attention is starting to turn to Spain and its rising borrowing costs. To this end, tomorrow’s bills auction in Spain will be a key barometer of investor sentiment.

For today, moderate risk taking could see gold lose some ground. We don’t feel this situation will persist, as doubts and uncertainty over the Eurozone are sure to resurface which could see renewed interest in especially gold and silver. However, we continue to warn that should the Eurozone debt crisis result in a severe drying up of money markets in Europe, we could see all commodities fall rapidly, even gold.

Gold support is at $1,750 and $1,724. Resistance is $1,796 and $1,816.