Gold Likely to Remain Under Pressure Amid Fading QE3 Expectations

Talking Points

• Crude Oil, Copper Outlook Unclear Amid Clouded Risk Appetite Trends
• Gold and Silver Likely to Stay Under Pressure on Fading QE3 Expectations

Commodity prices produced mixed results in the aftermath of yesterday’s FOMC policy announcement. Ben Bernanke and company upgraded their outlook for the US economy while maintaining a pledge to keep rates low at least through late 2014. The outcome weighed heavily on gold and silveras expected, with store-of-value demand for the two metals evaporating along with QE3 expectations. The behavior of crude oil and copper was more nuanced however, reflecting an unexpected reaction from risk appetite.

Indeed, the S&P 500 surgedin the aftermath of the FOMC announcement, a response that we did not expect. Looking at the US in isolation, the stocks rally seems to make sense. After all, with growth improving and the Fed clearly not interested in impeding it, the landscape appears rather rosy (anunexpected boost from JPMorgan certainly didn’t hurt either).Not all is as it seems however, because although the US recovery is gaining momentum, global output is still expected to contract this year courtesy of a recession in the Eurozone.

Taking this into consideration, the Fed announcement was a mixed blessing at best in that its apparent dismissal of QE3 meant that the US recovery – expected to yield a relatively modest 2.2 percent GDP growth rate compared with the long-run average of 3.4 percent – will be less potent of a counterweight to the slump in Europe than otherwise. These conflicting cues produced a mixed response, with copper following shares higher while crude oil stood barely changed.

Looking ahead, the risk appetite landscape still appears somewhat clouded, with S&P 500 stock index futures flat ahead of the opening bell on Wall Street. Crude oil and copper are conspicuously lower however despite a robust rally in European shares, meaning the risky asset complex is still not of one mind on how to interpret the current environment. We suspect the path of least resistance ought to lead lower, but that is far from confirmed and a high degree of caution appears prudent. Gold and silver remain under pressure as the Dollar continues to press higher amid fading QE3 bets and more of the same appears likely, with the US economic calendar thin on scheduled event risk that could jolt the markets and undermine momentum.

WTI Crude Oil (NY Close): $106.71 // +0.37 // +0.35%

A Bearish Engulfing candlestick pattern continues to argue for near-term losses, with a break below 23.6% Fibonacci retracement support at 106.50 exposing the 38.2% barrier at 104.38. Prices are carving out a downward-sloping chart pattern that can turn out to be a bullish continuation Flag or a bearish falling Channel, depending on follow-through from here. Near-term resistance lines up at 107.67.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1674.10 // -27.22 // -1.60%

Prices followed a bearish Dark Cloud Cover candlestick pattern below resistance at 1719.76 identified yesterday with a drop through initial support at 1686.57, the 23.6% Fibonacci expansion. Sellers are now challenging the 38.2% Fib at 1667.71, with a break below that aiming for the 50% expansion at 1652.68. The 23.6% level has been recast as near-term resistance.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $33.41 // -0.25 // -0.74%

Prices remain locked between the 23.6% and 38.2% Fibonacci retracements at 32.97 and 34.59, respectively. Overall positioning broadly favors the downside absent a daily close above 37.48, the February 29 high and peak of a Bearish Engulfing candlestick pattern. A break above 34.59 initially targets 35.66, while a push through support exposes the 50% retracement at 31.67.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.902 // +0.064 // +1.67%

Prices continue to consolidate above support in the 3.696-3.713 region marked by the 38.2% Fibonacci retracement and the late October top. A Bearish Engulfing top candlestick pattern continues to broadly call in favor of a downside bias. A break below immediate support exposes the 50% level at 3.606. Near-term falling trend line resistance lines up at 3.924.

Daily Chart - Created Using FXCM Marketscope 2.0

Gold climbs nearly 90 times in 100 years

Observers said it is likely to touch the $2000 mark this year as it was seen as the perfect answer for inflation and hyper inflation which is gripping most parts of the world.

NEW DELHI : Gold's value climbed nearly ninety times in the last hundred years as it climbed from $20 an ounce to $1777 an ounce.

Observers said it is likely to touch the $2000 mark this year as it was seen as the perfect answer for inflation and hyper inflation which is gripping most parts of the world.

They said 2012 looks a momentous year for gold and expected to increases in the price, investments, and production.

The yellow metal provides easier liquidity than most other investments last year and expected to repeat it this year as weel, they added.

On investment scenario, gold's appeal brightened last year as stock market and other financial markets stayed volatile throughout last year.

Meanwhile, Australia produced 270 tons of gold last year to remain in second position after leader China in gold production.

China, world's top producer topped the table with 361 tons in 2011 and is planning on producing up to 400 tonnes of gold in 2012.

Aussie gold production increased by 24 tons from 2010. The United States with a production of 230 tons remained at the Third spot last year.

Russia's production of 200 tons earned it the fourth position in rankings in 2011. Countries all around the world have been producing gold at a increasing rate throughout 2011.