Gold faces tough fight to maintain form

As gold has come ever closer to breaking the $1360 level, the pace of its ascent has continued to slow.

The current form of US economic data has implications for gold, pointing towards the Fed continuing its policy of printing US dollars. With gold being quoted in dollars, this should help sustain a longer run on the upside for the precious metal.

Few would argue that the fundamentals of this equation stack up to an optimistic outlook. However, there has been a growing disparity between what theoretically should happen and how the market actually reacts. The biggest culprit for this is paper gold, which is so often blamed by gold bugs for the malaise in the metal’s price. Of course, it is all too easy to ignore the fact that it was the ETF market that helped propel gold to its 2011 highs in the first place.

Tomorrow’s US FOMC minutes remain one of the key influences for all commodities, and gleaning an insight into the thinking on the voting board of US policymakers will give the markets a little more confidence as to the direction in which we are headed.

Gold chart

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