Gold Support Getting Less

Yesterday, Gold joined most other asset markets on a roller coaster ride as the morning’s pessimism gave way to excitement over the US economy and perceived progress in solving the Greek situation. US jobless claims numbers eased off, with initial and continuing claims falling to 348k and 3,426k respectively (from 361k and 3,526k respectively). The initial claims number was the lowest since 2008. In addition, housing starts also grew expectedly (1.5% m/m, consensus was for a 3.4% m/m decline) and the Philadelphia Fed Index showed strengthening industrial activity in the region, adding to optimism that the US economy was gaining traction.

Eurozone officials yesterday expressed their optimism that finance ministers would give approval to Greece’s second bailout package at this Monday’s meeting. There was also news from Athens, with officials there also optimistic that the government was close to achieving the additional €325m in spending cuts. Reports that the European governments might reduce interest rates on Greece’s bailout loans also bolstered market confidence. Lastly, the ECB has pledged further involvement in the debt restructuring programme.
The above contributed to a weaker dollar, which along with a healthy dose of short-covering and bargain hunting gave gold prices a shot in the arm yesterday afternoon. However, the upward momentum faded in overnight trading with the complex trading mostly sideways.

We expect this trend to continue into the weekend, as participants remain wary of taking on new positions ahead of Monday’s Eurozone meeting. Perhaps, given yesterday's reaction to positive US data flow, we could see some price action after this afternoon’s leading indicator numbers—though this would depend on the dollar’s reaction.

Gold support is at $1,714 and $1,697. Resistance is $1,739 and $1,747.