US economy remains fragile and that this is why the Fed is holding out on its decision regarding further quantitative easing

Once again, precious metals received a shot in the arm from a weaker dollar yesterday afternoon. The weakness was mainly as result of the better-than-expected current account figures and comments from New York Fed President Dudley that the US economy remains fragile and that this is why the Fed is holding out on its decision regarding further quantitative easing. Of course Dudley’s comments have also buoyed the complex from a liquidity perspective, especially since recently the news has not been too positive on that front.

However, this support proved transitory as the lack of physical buying has weighed on gold, which is taking the rest of the complex down with it. Physical buying out of Asia has evaporated as India’s bullion markets remain closed in protest to last week’s announcement of an increase in import duties on gold. Indian buyers are expected to return tomorrow.

This morning, precious metals are struggling to shake off the overnight downward momentum, with a slightly stronger dollar adding to negativity. Concerns over a stronger US economy and a slump in India’s gold demand (after the import duties are raised) are keeping the precious metals on the back foot. Not much to look forward to today in terms of data flow, although US housing numbers and scheduled Fed speakers could prompt some reaction.

Gold support is at $1,644 and $1,640. Resistance is $1,662 and $1,674.