13 Mar Wednesday Daily Outlook

Gold price easily broke 38275 level yesterday and holding as of now. Price was firm from early morning session supported by some physical demand in Asia but was limited to upside move by outflow from ETFs and better performance of US market.

Yesterday's move is what analysts called a technical move after gold broke through key level after remarks from Bundesbank president Jens Weidmann.

Gold rose above the level shortly after Weidmann told reporters that the Euro zone crisis "is not over" and said that Euro zone has "declining inflation risks".

"We still doubt a sustained rebound in Gold is warranted at this point while the market is set to remain depressed" says Andrey Kryuchenkov, analyst at VTB capital.

"Strong physical demand in China is the main reason behind Gold's resilience", one trader in Beijing told newswire Reuters this morning.

"But overall sentiment in prices is still weak. If demand from China weakens and we continue to see good US Economic data and stronger dollar, Gold has a chance to test $1500 (NPR. 36000) level this year"

On Feb 18, the first trading after Lunar New Year, volumes in the Shanghai Exchange for its most popular Gold Contract, the AU9999, set a new record of just over 22 tons. Since then daily AU9999 volumes have been more than double last year's average.

All of above points indicate that any move in upside direction these days can not considered as trend reversal, they are just correctives of downside moves. So, if you open long, that must be taken very cautiously, not holding the position for longer period of time and keeping a hawk eye on the market.

For now 38275 should provide support and if the price could push upwards, it could test 39000 level after breaking 38535 level. But if 38275 is broken and falls into the channel back again, we will have to see.

Happy Trading :)