Dollar’s Weakness, Then Strength, Confounds Investors, Leading To Large Technical Sell-Off 

Gold Fell $11, about 2% Friday to $651 per ounce.  A U.S. payroll data showed a moderately healthy growth and the the dollar was buoyed by talk of another rate hike by the European Central Bank.  The strength of the dollar, which rallied to 1.3 versus the Euro, an important technical barrier unleashed a waveof currency selling, primarily lead by large institutional investors. Likewise, the strength of the dollar, often an inverse barometer the gold prices, caused a technical sell-off of gold. 

Cooling Geopolitical tensions in the Middle East  between the United States and Iran, after U.S. Defense Secretary Robert Gates told reporters that the United States was not planning for a war with Iran, but was instead trying to stop Iran from contributing to the violence in Iraq. 

Thursday, Gold hit a 6 month high of $661.50 during Thursday trading as a result of The U.S. Commerce Department report that the economy added a weaker-than-expected 111,000 jobs in January, and the unemployment rate rose to 4.6 percent for the month, the highest since a matching rate in September of last year.  This is thought to be a contribution factor in the Federal Reserves Decision to leave interest rates unchanged for now. 

The Asian investors took profits on Friday, contributing to the large single day decline.  The IMF is also reportedly considering selling some of it’s gold bullion inventory.  Over-supply concerns also are contributing negative pressure on the Gold and Metals markets rumored to be due to hedge selling after heavy losses.

Despite the recent technical price fluctuations, institutional investors are increasingly buying, using the price dips and corrections as buying opportunities.  Physical gold markets are expected to increase demand over the next month, as we enter the Chinese Lunar New Year In mid February.