Gold once again closed bullish this week with strong gains and rally to all time historical highs as the demand for the precious metal continued to increase amid the rising uncertainty. Gold was bolstered by the prevailing debt woes with Ireland rating cut to Ba1 from Baa3 by the Moody’s. Sighting significant risk to Greece’s fiscal consolidation plan, Moody’s slashed Greece’s credit rating to the lowest, putting more pressure on EU leaders to ease the tough repayment terms on its bailout loan to Greece.
The dollar also weakened as debt woes spread to the United States with the ongoing debate over raising the debt ceiling. Bernanke also added to the pressure on the market after he signalled in the semi-annual testimony that the Fed is ready to add more stimuli to support the economic recovery that has been waning.
This week, the focus will remain on the key debt issues in Europe and the United States especially, as investors will start a new week with reaction to the European banks stress tests results and also the decision from the Congressional leaders as they are expected to provide Obama with the decision by this weekend.
The investors will assess the health of the banking sector in Europe and the extent of sovereign debt holding with the results of stress tests. Eyes will also be on any developments regarding the Greek aid package with no new information about the matter.
Gold will try to break its psychological resistance of $1600 this week. The measured and implied move by measuring the rectangle is a target of $1,625 – a level that is certain if the lack of confidence in the Euro zone prevails. The trend is extremely bullish but if an unwinding of heavily built-up position happens, gold can test its support level of 1575 for the coming week.
Silver continues its highly volatile moves, with speculators heavily on the buying side. If gold shines above $1600 mark, silver will break the 52 week high and will try to stay above the $40 mark. Alternatively, a break below $38.250 can push the metal to try the support of $36.
