Gold is looking better after receiving some solid support in Asia

US trading pushed gold down to a four-week low (amid a cross-asset liquidation that has become all too familiar of late) on heightened concerns over the ability of the US congressional leaders to reach agreement on reducing the budget. As it turned out, and unsurprisingly, no agreement was reached and this has thrown into doubt the extension of existing fiscal stimulus programmes that many believe have been propping up the US economy.

This also reignited fears over the US sovereign credit rating facing a downgrade, but overnight investors took heart over announcements by Standard & Poor (S&P) and Moody’s that they would be keeping their respective ratings unchanged. Fitch said that it would be reviewing its rating and provide a conclusion by the end of November — most participants are expecting a change to negative outlook.

Today, gold is looking better after receiving some solid support in Asia, especially on the Shanghai exchange. A relatively weaker dollar is also helping gold regain some lost ground. The other precious metals are largely tracking gold, although interest in PGM is relatively lacklustre.
Physical demand for gold is starting to return at these levels, with our Standard Bank Gold Physical Flow Index once again pushing out of a brief stay in negative territory (indicating net selling). We’ve seen this physical demand return time and again at around $1,650, providing a solid support level.

Gold support is at $1,665 and $1,636. Resistance is $1,726 and $1,756.