Gold biased to the downside, ahead of the Italian bond sale

As this week comes to an end, we can see gold is biased to the downside, where after the end of major events yesterday, the metal started to lose momentum as optimism dominated the market, where the positivity seen yesterday led investors to take profit on the metal and invest in other high yielding currencies and stocks, especially when the U.S. dollar reversed sharply to the downside.

Gold slumped today after starting the session at $1650.25 per ounce, to currently trade around $1645.90 per ounce after losing $4.35 per ounce or 0.26%. The metal set the highest at $1650.31 and the lowest at $1635.05 per ounce.

Yesterday, gold was able to hold onto the gains recorded earlier after the European Central Bank and the Bank of England rate decisions, where the steady rates supported markets to rebound on speculation Europe is likely to grow gradually in the coming period; however, gold declined as investors were holding more gold as a hedge against uncertainty as some analysts projected that the bank could shock markets again; however, investors liquidated their positions on the metal in order to get a part of the gains, which spread across the board.

Today, gold is expected to fluctuate heavily as this week came to an end, yet the shiny metal is negatively biased, where profit taking could continue on the metal ahead of the coming week, where markets are still waiting for the decision of the rating agencies on the European nations, which are currently under negative watch notice.

Markets are expected to remain volatile ahead of the Italian bond sale awaited later today, where despite the successful bond auctions made by Italy and Spain yesterday, markets are still tracking sales of bonds with longer-term maturities, and today Italy will auction as much as 3 billion euros of 6% bonds due in 2014, in addition to 4.25% bonds and 4.5% bonds due in 2014 and 2018; however, eyes will track the yields on those bonds as well as the demand.

Fears started to ease in the market, as we can see in the first two weeks of 2012 the bearishness eased slightly in the market and the sentiment improved; however, we cannot confirm that markets will rebound and Europe overcame the debt crisis until the results of the European summit at the end of this month and until the fundamentals of the first quarter of 2012, which should indicate that markets will continue the recovery and the debt crisis will start to ease or markets will reverse and the mild recession will turn into a deep recession or depression.

In general, the next week markets are still expected to remain volatile, yet consolidated ahead of the coming European summit, which could support the sentiment and restore some confidence or disappoint markets as usual and send the euro and markets in general to the downside.

Silver also declined as much as 0.64% or $0.19 per ounce to trade around $30.08 per ounce, after opening the session at $30.27 per ounce. The metal fluctuated sharply between a high of $30.28 and a low of $29.66 per ounce.

Among other precious metals, platinum also retreated after starting the session at $1498.75 per ounce, where the metal trades now around $1488.00 per ounce after losing $10.75 per ounce or 0.72%. The metal set the highest at $1498.50 and the lowest at $1470.75 per ounce.

Palladium lost as much as 0.81% or $5.13 per ounce to trade now around $630.50 per ounce, after recording a high of $638.50 and a low of $623.00 per ounce, noting that the metal opened the session at $635.63 per ounce.