Italian and Spanish debt auctions have downplayed market fears over the Eurozone debt crisis for now

Profit-taking began to weigh on precious metals during New York trading yesterday. This downward momentum has continued into this morning’s trade, although at a slower pace. In addition, yesterday’s successful Italian and Spanish debt auctions have downplayed market fears over the Eurozone debt crisis for now, which has seen support for Gold from safe-haven buying fall away.

This morning release of Chinese foreign-exchange reserves might also be contributing to gold’s downward movement. This can be explained in terms of the negative effect that a slowing down in Chinese foreign-exchange reserve accumulation would have on global liquidity and the ability of governments, especially those of developed nations, to borrow. The central bank’s holdings posted the first q/q fall since Q2:98, dropping from $3.2tr in Q3:11 to $3.18tr in Q4:11. We will be watching this figure over the coming months to see if this marks the beginning of a trend.

For the rest of the day, we could see some reaction to US Q4:11 earning reports or the University of Michigan’s consumer confidence reading. Most importantly, in terms of earning reports, we have JP Morgan today, with analysts expecting profits per share of 90c, down from $1.02. US consumer confidence is expected to have risen to 71.5 in January, from 69.9 in the
previous month.

Gold support is at $1,634 and $1,626. Resistance is $1,657 and $1,671.