Yesterday S&P 500 lost more than 1.5% of its value. According to NYSE brokers, the downswing was initiated by the orders placed by trading computers. Of course, the computers played a purely technical role but investor’s fears of the eurozone crisis and US recession contributed to the sellout as well.
Gold and silver reacted with a decline as well. This is the biggest weekly decline in the market of precious metals during the last 2 months. Brokers expect higher physical demand for gold after the price reaches $1680/oz, thus preserving their long-term bullish expectations for precious metals.
The long-term expectations of growth are based on the eurozone crisis and the US budget deficit. These factors are expected to support the demand for gold as investors will keep looking for safe-haven assets.
Besides, numerous central banks around the world keep expanding their gold reserves, thus supporting gold as well. Gold Council has recently published its report for Q3 2011. According to it, the purchases of gold by central banks increased by 148.8 tons in Q3, which is twice as high as the amount of official purchases for the entire 2010.
The demand for gold from jewelers supports gold prices as well. China is getting the leader in this segment, gradually outpacing India. This year China’s demand may reach 750 tons.
Forecast. According to the Department of Commodity Trading, , gold is in downtrend. If the price breaks below 1720, it will probably test 1700 and 1685. If there is a rally it will be of correction nature (profit-taking before the weekend). The potential targets are 1733, 1741-1746.
The next downward targets for silver are 30.5 and 30. However, there is a chance of recovery (profit-taking before the weekend). The upward targets are 31.90, 32.7, 33.
