Euro bounce - now or later?

16/08/2010 by Philinje.

Gold hit $1220 today in Asia and the Euro is bouncing, causing Euro gold to level off near 950.

We might see a bounce here in the Euro but chances are it will head further down before we see a significant short-term bottom. It got to 1.2730 or so and might get to 1.25.

Here is a great article on the near-term picture for the dollar, silver and gold:

http://sunshineprofits.com/commentary/13-aug

Note that there is a warning in this article of a short-term decline in precious metals at the end of August. This author also sees the dollar and gold moving up together, though the relationship is unclear. My theory is that these days a breakdown in the Euro causes gold to move strongly higher - less so in dollar terms but still to some degree.

Interesting news: a state in Malaysia has begun to use gold and silver coins as legal tender:

http://www.google.com/hostednews/ap/article/ALeqM5iSb9KMh7TzPxrCK2wi5JlhutZdhAD9HIE6K80

There could be more stories like this in the months ahead. It’s interesting that the use of gold as money is part of Islamic tradition.

This week we could see a near-term top in precious metals. And maybe we just hit it. If the Euro bounces hard here, gold could drop, but chances are the Euro bounces mildly then drops some more, and that could be the top in gold until we get through any coming crisis in the markets.

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