Gold Dip Below USD 1,600

Weakness in the gold price continued Thursday morning as the Gold fell $56.83 to $1,575.80 per ounce. Gold remains under pressure. The metal is closing in on its 200day MA. We believe that this downward pressure is likely to remain in place. Physical market demand from India and South East Asia continues to pick up, with gold below $1,650 providing support at this key technical level. However, as pointed out yesterday, the pick-up in demand is from relatively low levels, and overall demand remains well below levels seen in October.

The euro continues to weaken across currencies ahead of the Italian auction today. While gold in dollar-terms is under huge pressure, gold in euro-terms only shed €20. Market sentiment and momentum has also turned bearish on gold, reflected in the short-dated gold skew where puts are in high demand relative to calls.