Gold Declines with Risk Aversion

Gold is pulling back slightly as risk aversion hits the FX markets. Greece has set up a showdown with Germany by giving the EU one week to come up with financial assistance measures before it heads to the IMF for help. Germany has been calling Greece’s bluff by publicly contemplating the possibility of Greece going to the IMF. However, Trichet recently stated that the ECB feels it would be unwise to go this route. In all, the increase in uncertainty has triggered a large selloff in the Euro which is weighing down on gold and leading investors towards the Dollar for safety. However, Gold’s intraday losses have been minimal thus far compared to the pullback in the EUR/USD. Therefore, it will be interesting to see whether the precious metal can continue to hold strong above 3/18 highs and avoid a more sizable downturn in the process. The data wire will be relatively quiet tomorrow, meaning attention could continue to be focused on the EU and any other psychological developments.

Technically speaking, gold faces multiple downtrend lines along with intraday, 3/16and 3/17 highs. As for the downside, gold still has multiple uptrend lines serving as technical cushions along with 3/18 lows and the highly psychological $1100/oz level should it be tested.

Present Price: $1120.20/oz

Resistances: $1120.40, $1121.84, $1122.65/oz, $1124.27/oz, $1125.63/oz, $1127.33/ oz

Supports: $1118.51/oz, $1117.66/oz, $1116.00/oz, $1114.53/oz, $1112.84/oz

Psychological: $1100/oz, $1150/oz, March highs and lows