By: Ben Myers

This time last week, I was making a strong recommendation to buy gold futures. Another volatile week for the USD saw gold rally 4.43% over the course of the trading week, settling at $1741.55 a troy ounce by close of play Friday. The biggest rally was seen over the final 3 trading sessions, rising by a total of 4%, making this the 4th consecutive week that Gold futures increased in price. On Wednesday, the surprise announcement by the Federal Reserve, who pledged to keep the historically low interest rates the same until the end of 2014, heightened speculation of the Fed Reserve implementing a 3rd round of quantitative easing sparked a rally in Gold. The weakened USD pushed the price of Gold up to a near 7 week high and prices look set to increase by more than 10% for January, the largest monthly gain made since August of last year.

A look at the charts will tell you that fresh support was triggered after prices broke the key Fibonacci retracement level and the 100 day moving average. The price also increased above the 200 day moving average, suggesting an uptrend in the price movement and putting pressure on the 1744.85 Fibonacci Retracement level

The Week Ahead for the Gold Market

Also supporting an uptrend in the price of Gold is the fact that yesterday (28th) marked the start of the wedding season in India, the world’s largest physical consumer of gold. Traditionally, gold is given as a wedding gift and with the season running through to March physical demand is expected to remain high following on from the Chinese New Year; another time of gold gift giving.

The markets were unimpressed with the 2.8% YoY GDP growth in the US for Q4 and investors should keep a close on news from emanating from the WEF meeting in Davos and the Euro summit starting Monday. The dollar could further be weakened by the publication of weaker than expected data of service and manufacturing growth in the US with Friday seeing the release of an important gage of recovery in the workforce, the nonfarm payrolls. Various debt auctions in the Eurozone over the coming week should prove a good test of investor confidence in the EUR after Fitch downgraded Italy, Spain, Belgium, Cyprus and Slovenia last week. I can see a continuation of a weakened USD, which might spark some profit taking in the EUR and Gold, which should mean just a small rise in the precious metal.