Gold May Resume Rally

Yesterday France held its own bond auction thus selling 10-year and 30-year bonds to the amount of 7.96B euro. The 10-year bond yield reached 3.29% against November’s 3.18%. The 30-year bond yield reached 3.97% against December’s 3.94%.

Analysts expect the forecast for Japan’s GDP decline in Nov-Dec 2011 to be confirmed. China keeps outpacing the world’s 3^rd largest economy. Japan’s economic slowdown will make it more difficult to service the country’s public debt.

Of course, China’s economy currently slowing down as well, thus making investors withdraw their funds from the country’s stock market. As a result, the P/E ratio of the CSI declined down to 8.7 after CSI300 lost 25% in 2011. Companies are facing a liquidity crisis, thus making the central bank provide more loans.

Barack Obama announced the reduction of the US contingent in Europe by 6-10K people, which is a part of the military spending reduction program. Today the US is to publish its unemployment data. The forecasts are optimistic.

Iran’s central bank had to conduct an intervention to prevent the national currency form depreciating. China and Japan also reduced their imports of Iran’s oil (for commercial reasons).

Gold rallied yesterday on fears connected with Iran. It has been showing negative correlation with Euro for 2 days in a row.

The US Mint has already sold 45.5K ounces of gold coins as compared to December’s 65.5K ounces. HSBC and Barclays have lowered their forecasts for the price of gold in 2012 down to $1850 and $1875 per ounce correspondingly.

Forecast: According to Department of Commodity Trading of , today gold may continue its rally. To do that, it needs to stay above 1620. In this case, the closest targets will be 1638-1640 and maybe 1644. A break below 1620 will give way to 1606-1603 and further down to 1596.

As for silver, it hasn’t still made a new high. The probability of a downswing is getting higher. If siver fails to consolidate above 29.30, the price will probably decline down to 28.97, 28.65 or even 28.5. Otherwise, the closest target is 30.