Weekly Analysis
Gold closed the week at 1294.75 booking a marginal gain – its second consecutive weekly gain. The rally has made some shorts scramble to cover their positions but there remains a very high risk of a significant short squeeze that will propel gold prices higher in the coming weeks. This is due to still robust demand for physical gold in much of the world including India and China. Detroit’s bankruptcy is a harbinger of things to come as large states, such as California and Illinois, are also very vulnerable to bankruptcy.
Continuing robust physical demand from central banks and especially from wealth buyers in the EU, U.S., the Middle East and Asia – especially China helped prices gain this week.
Gold’s advance came as the U.S. dollar pulled back from Thursday’s gains, with the dollar sitting at 82.606 Friday, down from 82.783 late the previous day. Gold futures, like those of many commodities, are usually denominated in dollars, a fall in the U.S. unit makes gold less expensive to holders of other currencies, encouraging buying.
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