Gold Forecast Dec. 29, 2011, Fundamental Analysis

Gold prices declined amid lack of economic report from the U.S economy, as debt crisis risks were highlighted after the European Central Bank’s balance sheet rose to a record 2.73 trillion euros since it offered three-year loans to financial institutions last week, replacing optimism on Italy’s 9 billion euros of 179-day bills sold at an debt auction today.

No major data was released from US, Euro Zone or UK on Wednesday, so traders were somehow clueless over the economic recovery. Thereby, European and American equities retreated after the Central Bank’s balance sheet was released.

Traders switched on the holiday mode with the year’s trading nearly complete, so trading volumes ebb down and market movement is pretty stuck within a tight range before the New Year’s holiday, yet with slight punch of cautious optimism. Sentiments will start to shape as investors remain cautious ahead of the New Year’s holiday but traders will be mostly concerned about the latest development from the 17-bloc euro area.

Accordingly, we should expect more fluctuations for gold, but should the current pessimism persist, we should expect gold prices to extend the rallies, however, the level of uncertainty is very high, so traders are ought to remain cautious.