Gold pressured by dollar and oil prices

The SB research team also notes that current physical gold demand is on the weak side as the market is now entering a phase wherein further rallies in gold are more likely to attract more scrap gold tonnage. While SB maintains its projections for gold to possibly reach $1,500 sometime in Q3 of this year, (or sooner, if MENA developments warrant), the seasonal weakness in physical demand is seen as assisting the capping of any gold rallies (as it has in the past two weeks) for “a few more weeks.”

MENA news will, of course, continue to impact oil (and gold) prices and keep central bankers, politicians, and military folk plenty busy over those coming weeks.

Fed officials (and probably other central bankers as well) have basically affirmed that $150 oil would represent a significant enough pivotal level; one at or near which, monetary authorities would be prompted to take some kind of action. No one, anywhere, at this juncture, wants to place the emergent global economic recovery at risk. The risk, however, may be transitory, as a CNN Money survey reveals that most market experts think oil and gold prices will settle down after Mr. Gaddafi suffers Charlie Sheen’s “employment fate.”

Still under consideration by the White House, is the plan to release some supplies of crude from the US Strategic Petroleum Reserve; this, as $3.50 per gallon US gasoline prices have angered the consuming public and are threatening to send it back into a state of “hibernation” in terms of overall consumption, not just that of gas. As well, still under review, is a NATO plan to impose a no-fly zone in Libya that is intended to avert Mr. Gaddafi from carrying out air strikes on the rebels.

At any rate, whether or not the Libyan situation does not come to a quick resolution, the attitude on display by the US Fed is that it (or at least four of its member presidents) is in no hurry to extend or expand the QE2 program. Messrs. Fisher, Plosser, Lockhart, and Evans are all of the opinion that every good thing eventually does come to an end, especially if the risk it entails outweighs its benefits. The FOMC meets one week from today to discuss all of this, and more. The post-meeting language is likely to be parsed with at least as equal a degree of intensity as was the one that was issued in early November of last year, when the good ship QE2 was set sailing on the US economy’s rough (at the time) seas.

The trend toward hiking interest rates is hard to miss, (but by a few holdout commentators who envision “easy money” as basically an everlasting proposition, and one which will perpetually fuel “To Da Moon!” spikes in commodities). Bloomberg reports that The Bank of Thailand and Bank of Korea will each raise key interest rates this week by a quarter percentage point. As well, Malaysia may also be approaching the end of its pause in boosting borrowing costs.

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