Gold Fundamental Analysis Jan. 25, 2012, Forecast

Economic Events: (GMT)

19:15     USD       Interest Rate Decision                                 0.25%                    0.25%

Federal Open Market Committee (FOMC) members vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

A higher than expected rate is positive/bullish for the USD, while a lower than expected rate is negative/bearish for the USD.

 19:15    USD       FOMC Statement

The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) statement is the primary tool the panel uses to communicate with investors about monetary policy. It contains the outcome of the vote on interest rates, discusses the economic outlook and offers clues on the outcome of future votes.

A more dovish than expected statement could be taken as negative/bearish for the USD, while a more hawkish than expected statement could be taken as positive/bullish for the USD

Analysis and Recommendations:

Gold is trading 1666.45 down from yesterday by 11.85

The US dollar picked up some strenght during the day today, which helped fuel the drop in gold, but overall, there was no real fundamental reason pushing gold down, except it had soared for two days, and was a great opportunity to take profits. Gold climbed by almost 10.00 on Friday and 12.00 on Monday.

Even though no settlement has been reached with Greece, which would have caused investors to continue to run to gold as a safe haven, the price was just too high for traders to risk moving in to buy gold, while sellers were able to take profits off the table.

Gold might just recover tomorrow, it might be smart to buy on the dips and see if gold surges again past  short-term resistance at USD1,681.65.

There are still mounting tensions in Iran, as the EU joined the embargo and the US upped the ante today.

Continued problems plague to EU, today, it was reported that Portugal may require a second bailout, putting everyone on edge. Spain and Italy still need to be resolved.

It seems the IMF has not been able to raise as much as they thought, but that will not be clear until their meetings in Mexico the end of February, but earlier IMF directors suggested that the EFSF and the ESM join together adding their funds into one fund which she maintained could be as large as 1 trillion euros.

She also noted that global growth esitimates would be lowered.

On Wednesday, the FOMC will issue their statements which will effect the USD.

Gold could still be a good buy situation.

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