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Gold continues its decline

Gold is slightly lower on the day as the precious metal is set to have its worst week in two months.

Gold is trading $1254; it has lost 3% this week and has not shown any signs of recovering. Now that the US has revealed a worse-than-expected contraction in growth for the first quarter, gold traders should not be worried about a strong dollar.

The major focus next week will be on the European Central Bank, and Goldman Sachs has already called for an interest rate cut of 0.15%. If Mario Draghi introduces some form of monetary easing we could see gold continue it declines.

As I mentioned before, the record highs in the Germany 30 and the S&P 500 underlined trader’s appetite for riskier investments. If the ECB do not introduce monetary easing next week we could see a reversal of cash out of stocks and into gold. Mr Draghi alluded to taking action in June, but if he doesn’t he wouldn’t be the first central banker to drop hints and then not act on it.

Gold could target the 100-hour moving average of $1269 if the ECB does not take action. The $1240 level is the next support down should monetary easing be introduced.

Spot gold chart

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