Following an overnight sell-off during the Asian trading session, gold continues to show weakness this morning as the sharp rally brought on by last week’s dovish FOMC statement on Wednesday has been short lived. While overall volume picked up throughout the week, which is always a good sign, physical demand was not enough to take on the speculators who bought on Wednesday but were content with taking a profit before the end of the week. Despite the increased buying from our corner of the market and the continued rise in the holdings of ETF’s, gold struggles to hold a rally as sellers emerge above $1,265.00, while buyers enter as we begin trading below $1,240.00. In the short term, we are again faced with a tight trading range as witnessed by the 10 day average in gold at $1,252.60 being within a good days trading range of the 100 day average which currently stands at $1,134.00. Keep an eye on the gold silver ratio in the coming days which is currently trading around 79.00. While silver failed to hold above $16.00 which was a bit disappointing, I continue to think the demand for silver which continues to be quite good will propel silver into a leadership role sooner than later and be the catalyst for a rally that sees silver testing $17.25 – $17.40. A silver rally towards these levels likely brings the ratio back towards 75 but enables gold to test $1,300.00.
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