Last week was dominated by dollar selling as the likelihood of an immediate debt default in Europe and currency crisis has been averted. Traders sold dollars against nearly all the major currencies except the Japanese yen.
The dollar value of gold fell relative to a basket of currencies and this helped spur a rally as the market compensated for this depreciation. The risk of conflict in the Middle East between Iran and Israel, as well as other major nuclear powers is a destabilising factor and provides further benefit to gold.
The world economy is running in a number of different gears, the East which has been the turbo charged leader is now travelling at a cruising rather than a racing speed.
In the U.S., the economic outlook is improving, but the pace of recovery while encouraging is more a relief than anything else.
Meanwhile, Europe continues to cause international concern as flagging economies with increasing debt burdens and more stringent oversight continue to spur investors to look for safety in commodities like gold.
Technically, the market is looking to last year’s highs at 1804.4 initially and then to 1908.6 longer term.
