Gold rebounds ahead of the European finance ministers’ meeting tomorrow
Gold rebounded to the upside with the start of this week, where after the excessive liquidation seen on the metal last week, gold returned to gain positive momentum ahead of the finance ministers' meeting tomorrow, while markets are mixed and the sentiment is still jittery, in the time eyes are focused on European lawmakers to implement measures and tackle the two-year debt crisis.
Gold opened this week at $1683.79 per ounce, and recorded a high of $1715.20 and a low of $1680.95, and is currently hovering around $1710.40 per ounce. In our opinion the incline seen today is only a correction and gold is bearish over short-term basis.
Technically speaking, gold is biased to the downside, as we can see the simple moving averages (SMA) 200 and 50 provided a crossover, which is a negative sign, especially when the metal is still below the trend's line resistance level at $1715.00 and also below the mentioned moving averages. In case, the metal breached the mentioned resistance, it will face strong resistance levels at $1740.00 and $1750.00 per ounce.
The euro-zone finance ministers are to meet tomorrow, with reports indicated that European leaders have finally found common ground and decided how to leverage the firepower of the European Financial Stability Facility (EFSF) in tackling the debt crisis; however, decisions will be made in the coming two days, when the euro-area finance chiefs are to join the European Union ministers in a meeting on Wednesday.
European finance ministers are to discuss the mechanism of leveraging the European rescue fund in addition to the measures required to provide financial stability, as the ministers are set to approve new measures required to stop yields on European bonds from rising further. Furthermore, European ministers are expected to discuss the possibility of providing governments with credit lines, according to Reuter.
On the other hand, Moody's the rating agency threatened the entire union ratings, explaining that the deepening debt crisis in addition to the rising yields and the financial instability could cost European nations their credit rating, as the agency said that credit risks will continue to intensify in the short-term without any quick measures to stabilize markets.
Moreover, an Italian newspaper (La Stampa) explained in a report that the International Monetary Fund (IMF) was preparing for an aid package worth 600 billion euros for Italy, which supported markets to rebound slightly; however, the effect is slight on the market now as an IMF spokesman denied any discussions with Italy on a financing program.
Among other precious metals, silver also rebounded to the upside with the start of this week, where after the opening of $31.16 per ounce, the metal recorded the highest at $32.02 and the lowest at $30.72, and is trading in the momentum around $31.93 per ounce.