Physical Gold demand continues to place a floor on prices

A resurgent dollar weighed on Gold price overnight, as Moody’s announced a slew of rating actions across Europe. Among the notable actions, was the downgrade of Italy, Portugal (both one notch) and Spain (two notches). Not even the UK was left unscathed, receiving a negative outlook (from stable). The agency cited “growing financial and macroeconomic risks emanating from the Eurozone crisis”.

Physical Gold demand continues to place a floor on prices, as we witnessed a resurgence in interest after the overnight dip in prices. Around $1,715 seems to be the level of support currently offered by the physical market. Later this morning, we’ve seen dollar strength relenting, which has eased downward pressure on precious metals. We expect the complex to continue tracking euro/dollar movements today. To this end, we could see a reaction from US retail sales and business inventories data out this afternoon. Better- than-expected data might prompt some appetite for risk, which could see the dollar lose some ground.

Gold support is at $1,712 and $1,705. Resistance is $1,730 and $1,741.