Market Commentary:

Ø Strong buying interest overnight had the day start with the metal opening higher at 1567.75/1568.75. Range bound though on this last trading session of 2011, had the metal dipping to an intraday low of 1561.25/1562.25 as equities opened lower, but rebounding quickly to an intraday high of 1581/1582 mid session as the dollar declined. Profit taking had gold close the day almost unchanged at 1566.25/1567.25.

Ø Stronger base metals overnight saw silver open higher at 27.95/28.00 but slipping shortly after, alongside declines in crude, to an intraday low of 27.82/27.87. Continued strength in base metals, however, minimized silver’s slippage as bids took the metal to its intraday high of 28.46/28.51 mid session. As with gold, profit taking saw silver close the day nearly unchanged at 27.92/27.97.

Technical Commentary:

Ø Spot gold closed down on the weeklies, at 1566/67. While the long-term uptrend off the October 2008 low was breached during the week, it held on a closing basis on the weekly chart. Since the peak on September 9th of this year, we have had lower highs and lower lows, and thus gold has entered a downtrend. Trendline support sits at 1538. Key support sits at 1448, the 38.2% retracement of the 3-year uptrend. Resistance sits at the weekly high around 1614.

Ø Silver also had a down week, closing at 27.92/97, after nearly matching the September low at the 26.00 level during the week. Key support sits at 24.25, the 61.8% retracement of the 3-year uptrend off the October 2008 low. The 3-year uptrend also comes into play at the same level. Resistance sits at the weekly high in the 29.19 area. While the long-term uptrend is still intact, the intermediate trend has been down since the April 2011 peak, with successively lower highs and lower lows. The Gold-Silver ratio closed the week and the year at 56.17, and we are bullish the ratio (i.e., meaning gold should outperform silver) so long as 54.11 holds, which is the 61.8% retracement of the collapse in the ratio.

Technical levels for 2^th Jan, 2011:

Metal	Support ($/oz)	Resistance ($/oz)
Gold	1,540.25	1,585.00
Silver	27.102	28.309

Disclaimer:

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