Gold Weekly Forecast December 19-23, 2011, Fundamental Analysis

, as the U.S. dollar strengthened on mounting fears the European debt crisis is worsening, after the market saw the ECB and the EU summit nothing but a major disappointment and rating agencies continued to add their negative imputes to the abysmal equation.

Over the week, economic data from the United States basically showed better than expected economic progress, where the manufacturing sector activities continued to expand in December, while this week our eyes will be on market movements rather than the data as this is the last week before Christmas and the end of the week and position squaring and closing the books will be evident as traders step aside ahead of the New Year and that will be the main focus.

We need to track the debt sales this week as well with eyes on Italy, France, Greece and Portugal as the yields and demand will be closely observed. The euro area lacks major fundamentals yet the debt crisis developments and any comments from leaders will be watched and the Italian Senates are expected to follow the lower house of Parliament vote and also okay Monti’s 30 billion austerity package this week.

As for the United States the data is heavy housing data alongside the GDP and income report. The data will add to the volatility in the market, especially if the data worsens and adds to fears of slowing global growth yet good data might help in easing the strain on markets that are preparing for the holidays ahead.

We expect gold prices will continue to rise over the coming period, however, but we also expect volatility dominate gold prices, despite of the recent economic improvement, yet risks are still surrounding the progress of several economies, especially as the outlook for global economies remains full of uncertainty, and that should continue to provide gold prices with the safe haven appeal. We also expect Europe to take over the steer next week, where investors will look forward to the final process of European nations and the European bond auctions.