Gold suffers together with Dubai debt worry

Omar Arnaout from X-Trade Brokers, XTB at 12/01/09

Gold has suffered a major decline in the last two days after reaching record levels in the last few weeks. This comes together with the strengthening of the US Dollar, which has deacreased demand for the precious metal, owing to the unstable economic situation in Dubai which is currently trying to reschedule its debt. This signals a possible short term decrease in the price of the metal though in the long term it is believed that Gold will continue its increase surge as central banks aim to diversify their reserves in order to protect themselves from currency debasement.

From the technical point of view the first significant support levels are found on the levels of 1130.13 and 1124.84, which represent the 38.2% and 41.4% retracements of the increase movement initiated at the end of October. On the other hand if stock markets return to the increase movement together with the EURUSD market then an earlier bounce back can be expected.