Gold in euro-terms will outperform gold in dollar-terms

Apart from debt problems in Europe, risk appetite is also little ahead of the weekend. At the same time market is more illiquid than usual with many US participants largely inactive since yesterday. Price movements are therefore more pronounced.

Sovereign risk remains at the forefront as bond yields in Portugal and Spain continues to rise. The 10y yield on Spanish debt rose to record levels around 5.17% yesterday. The euro is still struggling. We continue to see net physical buying of gold, especially on dips. We maintain gold in euro-terms will outperform gold in dollar-terms.

Gold support is at $1,354 and $1,349. Resistance is at $1,370 and $1,380.