Gold and silver have continued to enjoy solid support from investors concerned over the Eurozone

Gold and silver have continued to enjoy solid support from investors concerned over the Eurozone and, to some extent, the tensions surrounding Iran. For gold, buying on dips remains the favoured strategy as participants appear to be positioning for further upside. With regard to silver, investors seem more cautious. PGM have not benefited much from rising safe-haven demand, and appear to be weighed down by the stronger dollar, having remained relatively range-bound since early yesterday.

Physical demand is remains relatively light, although we have seen a pick-up in Indian buying ahead of the upcoming religious festivities. However, as we’ve highlighted before, the weaker rupee is dampening this demand, and we don’t expect it to provide the same measure of support that it has in previous years. Chinese demand for physical gold has been fairly strong this week ahead of New Year celebrations which begin 23 January.

Better-than-expected ADP employment change data prompted a sell-off in gold yesterday afternoon, although this was shortlived. Given this reaction we could see another dip in response to this afternoon’s non-farm payrolls data, should the numbers boost confidence in the US economy and inspire more risk taking. Analysts are expecting 155k jobs to be added in December, a strong improvement on the 120k increase seen in November. A rise in the unemployment rate to 8.7% from 8.6% is expected.

Gold support is at $1,596 and $1,582. Resistance is $1,623 and $1,634.