Last Update: October 24, 2010 16:41 ET
Weekly Report on Gold, Silver, Base Metals and Crude Oil
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Precious Metals Report
Gold retreated for the time in 6 weeks as USD bounced. The Benchmark contract fell to 1315.6, the lowest level in more than 2 weeks, before settling at 1325.1, down -3.42%.
As I mentioned above, the long-term outlook for Gold remains Bullish, as QE-2 from central banks and sovereign debt crisis in peripheral European economies are factors supporting the up-trend I believe.
The precious Yellow metal has been rallying over the past several weeks as speculations for Fed’s return to QE weakened the USD.
As the US FOMC meeting approaches, the market set to worry that easing measures announced by policymakers may be less aggressive than the market has priced in.
This was one reason for the USD’s recovery last week. In fact, I believe both situations, aggressive QE-2'ing or mild QE-2'ing, would be positive for Gold.
Should the US Fed announces measures that exceed market expectations, the USD will be under “extreme” pressure.
While weakness in USD benefits Gold, capital inflows for Gold as an inflation-hedge will also rise. Now, if the central bank disappoints the market by beginning the QE-2 will only a small amount, the USD may rebound temporarily. But, players will then begin to price in more Southside risks for US’ economic recovery and action will likely cause a rise in Gold buying as a safe-haven asset.
