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Gold Risks Losing Upward Momentum This Week

March 17, 2014 at 21:56 by Vladimir Vyun

Gold was rallying since the beginning of this year, demonstrating a very impressive performance. Can the precious metal maintain the upward momentum this week? There are reasons to doubt sustainability of the bullish trend.

The most obvious negative factor for gold is the monetary policy meeting of the Federal Reserve on March 19. It is expected that the US central bank will continue to reduce its stimulus program, boosting the dollar and driving commodities down. There are quite a few economic reports from the United States this week, and if they confirm growth of the US economy then precious metals will likely fall.

Signs of slower growth in China bode ill for gold, promising falling demand from the Asian country. As for India, the depreciation of the rupee also means less buying of the metal that is traditionally valued in this country for its usage in jewelry production and as a savings vehicle.

Tensions between Russia and Ukraine, which increased after Crimea held a referendum about secession from Ukraine and joining Russia, should have helped gold, but surprisingly enough traders were not particularly bothered by the geopolitical risks. Of course, this could change any moment and the situation in Eastern Europe may yet increase attractiveness of the precious metal as a safe haven. The Commitments of Traders report suggests that there are still more bulls than bears.

All in all, analysts are skeptical about the ability of gold to sustain its rally this week. DailyFX is neutral on the precious metal, while TradingNRG is outright bearish, saying that “gold and silver might change course and fall for this week”. It does not mean that the long-term trend has changed, but a short-term correction should be expected after the recent strong move to the upside.

If you have any questions and comments on gold today, use the form below to reply.

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