Weekly Gold Outlook- January 23, 2012

By: Ben Myers

The precious metals market enjoyed a volatile but profitable week for traders as gold ended the ended the week with a range of $38.70, and $9.50 higher for the week, closing Friday at $1666.75, a rise of 0.74% for the day.

The week in gold was dominated by heavier-than-usual physical demand in China, as consumer demand before the Lunar New Year increased. Thursday saw Gold prices reach their highest level since the middle of December, rallying to $1670.45 an oz. Friday proved to be the most volatile of days to trade with a range of $23.80, reaching a high of $1666.80 and a low of $645.20.

The price of gold is primed to break through the Resistance level point at $1667.25 and could easily pressure the R2 point at $1679.35. Although demand from China is expected to subside during the week as the Lunar New Year begins (23rd), we are fast approaching the Hindu wedding season, with the most prestigious of dates being the 26th. Physical demand increases considerably in India during this time as Gold is a popular gift to give during this period in India, the world’s biggest consumer of gold.

The Week Ahead

When looking at the week ahead, gold traders should be keeping an eye out for what comes out of the Federal Open Markets Committee two-day meeting over Tuesday and Wednesday. There have been indications of increased stimulus for the USD, which received a boost during the week with jobless claims falling to a near 4 year low. Also boosting the USD was a lack of confidence in the Euro. After some gains made early on in the week, investors abandoned the more risky position to find favour in safe havens like Gold, Silver and the USD. Investors should also keep an eye out for events unfurling in the Eurozone and the demand for the EUR. This week sees the 17 finance ministers of the Eurozone bloc meeting and positive news emanating from there could add pressure to an already fragile USD.

Traditionally when the USD strengthens, the price of gold goes down and vice versa, but all indicators are pointing to a bullish action on the precious metal with both Simple Moving Averages and Exponential Moving Averages indicating Gold being a strong buy in the week ahead.