Gold is up marginally in trading in London this morning. The London AM Gold Fix at 1030 GMT this morning was at $917.75, £464.80 and €580.854 (from $934.25, £471.08 and €587.95 on Friday).
Gold is stronger as the dollar has weakened despite leaders of the G7 and IMF governing council saying they would do all in their powers to provide market stability. Continuing worries about the health of the international financial sector has led to declines in stock markets internationally and renewed risk aversion.
The G7 industrialised nations on Friday night endorsed plans to force banks to hold more capital to guard against risks that contributed to the credit crisis, as part of an initiative to strengthen the financial system. The G7 also signaled concern about sharp movements in currencies that it said threatened global economic stability. The new language is a sign of heightened global unease about the weakness of the dollar - and lately sterling - relative to the euro and fears of a dollar crisis (as warned of by George Soros amongst others).
However, signaling concern over a sliding dollar is unlikely to lead to a sustained rebound in the dollar. ‘Jawboning’, market intervention and manipulation will only affect prices in the short term as ultimately the long term fundamentals of the U.S. economy and the huge imbalances challenging the U.S. economy will dictate the fate of the dollar. The dollar’s status as the global reserve currency could be challenged by the euro or a basket of currencies and gold in the coming years.
Wall Street is bracing itself for possible market turmoil this week with more extremely large write downs expected from Citigroup and Merrill Lynch. There are fears regarding the extent of the multibillion write downs to be announced, as Citi and Merrill are two of the worst casualties of the credit crunch.
The financial turmoil could intensify if the announced write downs are worse than expected. Also significant job losses are expected to be announced. Kenneth Moelis of UBS told Bloomberg that Wall Street may have to shrink its workforce by about 35 percent. In this environment, there is likely to be safe haven demand for gold, and it is likely to remain well supported at these levels.
Support and Resistance
Support is at $880 and $905. A close below $905 could see us retest the recent lows at $880. Resistance is now at $950 and $1,000.
Silver is trading at $17.70/17.80 at 1445 GMT.
Platinum is trading at $1950/1960 (1445 GMT).
Palladium is trading at $454/459 per ounce (1445 GMT).