Gold's London AM fix this morning was USD 1,732, EUR 1,316.51, and GBP 1,093.09 per ounce.

Yesterday's AM fix was USD 1,716, EUR 1,320.51, and GBP 1,094.74 per ounce.

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Gold fell $23.50 to as low as $1,705.80/oz by about 1200 GMT, but then rose strongly for most of the trading session and closed near high of $1729.91/oz - for a loss of just 0.05%. Gold ticked higher in Asian trade touching $1,735.18/oz and is marginally lower in Europe.

Gold testing support at $1,700/oz and then the sharp turn around seen yesterday is indicative of a market that is consolidating and soon to go higher. The price action seen in the gold mining shares, with both the XAU and HUI indices surging nearly 3% on the day, is also indicative of a market that wants to go higher.

Gold is 0.7% higher for the week and a higher weekly close would be the first higher weekly close after 2 weeks of falls. This would be important technically and would embolden traders to again go long gold more aggressively.

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It may also reassure western physical buyers who have been dormant in recent days with experience  and reports of subdued physical demand in the US and EU.

Euro gold fell to about €1,312.50/oz prior to recouping some of its losses but the euro has fallen 2% against gold so far this week.

Sterling has performed well this week and is flat in gold terms and the good retails sales data today saw sterling rise a further few pounds against gold.

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Gold in Major Currencies in February - Reuters Global Gold Forum

The Japanese yen has come under pressure this week and has fallen 2.6% against gold due to continuing ultra loose monetary policies and yen debasement.

Gold continues to consolidate in most currencies after the strong gains of January. Dollar gold's trading range is $1,700/oz to $1,763/oz. Gold is just 4% from resistance at the psychological $1,800/oz level and a move above $1,763/oz or higher weekly close this week should see us challenge that level.

The fundamentals of the gold market remain sound as ever what with sovereign debt crisis in the Eurozone and the risk of sovereign debt crisis in other major economies and oil prices over $102 a barrel on concerns of conflict between Israel and Iran. All of this suggests that stagflation could soon confront investors.

A regional war looks increasingly likely in this regard and should result in a period of risk off as seen in months prior to the war with Iraq in 2003 - which saw equities fall and oil and gold rise.

Silver slipped over 2% to as low as $32.643 before it also stormed back higher in New York and ended near its late session high of $33.548 with a gain of 0.24%.

Silver too has all the technical hallmarks of a market that wants to go higher and a breach of $35/oz could quickly see silver move to $40/oz or $45/oz. 

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