Gold is the most sensitive to liquidity and interest rates

Gold is heading down despite the weaker dollar since yesterday. With gold above $1,120, seeing little physical buying— which could see gold struggle to sustain rallies above $1,130. In fact, the metal seems set to revisit $1,100. Resistance is at $1,095 to $1,089.

With further indications that China could accelerate monetary tightening, as inflation in China has risen, gold demand may wane. Of all the metals (including base and precious metals), gold is the most sensitive to liquidity and interest rates. However, we doubt that tighter monetary policy in China can affect gold demand much. Rather, we believe that monetary policy in the US will be bearish for gold.