Mild speculative buying in gold

 

Gold and silver came under some selling pressure as the dollar strengthened at the onset of New York trading hours. Soon afterward, the dollar weakened again, but gold and silver did not manage to recover much of their losses. Perhaps heightened optimism, sparked by apparent progress on the Greek political wrangling, reduced the safe-haven appeal of these metals. Coalition leaders in Greece have reached agreement on most of the required austerity measures that would enable the country to access the second €130bn in bailout funds, although pension cuts remain a point of contention.

Overnight, we saw mild speculative buying in gold, along with continued interest on dips from physical buyers. Today, the complex remains largely shackled to dollar movements, particularly in relation to the euro — dollar strength has been weigh on price for most of the morning. Today’s ECB announcement is not expected to hold any surprises — interest rates are expected to be kept on hold (although our G10 analyst feels a cut is not entirely implausible). However, markets will most likely to be looking for hints regarding plans for a possible extension of the ECB’s long-term refinancing operation (LTRO), which of course would be bullish for precious metals. As it stands, the there is one more 3-year LTRO scheduled for 29 February.

Gold support is at $1,722 and $1,710. Resistance is $1,750 and $1,765.