Morning Futures Roundup
Will the Euro Crisis Actually Hurt Gold?
Fundamentals
Just when Gold futures seemed to be headed for a correction, Portugal's debt situation has led to renewed safe haven buying pressure. Many traders have been ignoring the 800 lb. gorilla in the form of debt from Portugal, Spain and Italy, but eventually, they will have to step back to reality.
The news that some Eurozone nations had been encouraging Portugal to take aid behind closed doors has been a sign that maybe things are worse than previously expected. The stronger Eurozone nations can only support nations with debt issues for so long. Several of the nations that are facing debt problems include larger economies, like Spain and Italy, which may require more aid than the smaller economies of Ireland and Greece.
This news is mixed for Gold traders in the US. While there may be some flight to quality buying, the US Dollar could rise versus the Euro. The question then becomes how strong demand will be for European Gold ETF's. If the pace of ETF investment in Europe increases at a brisk pace, then physical demand for the metal could cause Gold to strengthen in Dollar terms, even if the greenback strengthens significantly.
Technical Notes
Turning to the chart, we see the Feb. Gold contract trading below the 50-day moving average, which can be seen as a negative. Prices were able to hold support at 1365. A breakout below this level could be seen as a bearish breakdown. If the market is able to hold this support level, we may see more buyers coming in and the contract possibly testing highs near the 1420 level.
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About Mike Zarembski
Born in the grain pits of the Mid-America Commodity Exchange (MidAm) in the early 1990s, Mike's futures career soon shifted to the offices of TD Waterhouse in 1999, followed by Xpresstrade in 2002 and eventually optionsXpress in 2007.
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