Gold is trading at US$1950, and two attempts have been made in the last one month to break through the US$1980 level and in the third attempt it could break through the critical resistance. What propelled
gold recently has been the uncertainties around the US banking system, and also similar developments in
Europe, and the fears that it could spread to other territories as well. The initial factors that favored gold
were the high probability of a moderation in the approach of the central banks to further tightening of
the monetary policy. It was also widely speculated that the potential for a slowdown could also add to
the uncertainties. This helped gold to a certain extent in moving up. The support levels remain at 1860 and 1830, and the chances of these levels being broken on the downside remains very remote. In fact, it was attempted once and it bounced back from those levels. That the Dollar Index is within narrow ranges at present also lends some support to gold. There is a feeling among some of the Fed officials that the stress in the banking system will only accelerate the arrival of the recessionary conditions earlier than expected. This will also keep gold fairly well supported.
It may be stated here that gold still retains its safe haven status and the recent events have had a
positive impact due to this. But the higher probability is for gold to test the US$ 2030/2060 levels. The
only factor that may dilute this move would be a strong Dollar on the Dollar Index, and a more
prolonged interest rate up-cycle. It is a bit too early to make any safe conclusions on this as geo political
conditions are not settled as yet, and market volatility is still rising.
