Gold needs to break $1,700 for momentum to continue

U.S. dollar gold prices  hovered above $1,690 an ounce Tuesday morning in London, close to one-month highs, while prices in yen quoted on Tokyo's gold futures market set a new record, following an announcement of open-ended asset purchases and a new, higher inflation target by Japan's central bank.

"[Gold] is struggling along the 55-day moving average at $1,695.96 and just below the downtrend channel resistance line at $1,704.89," says Commerzbank senior technical analyst Axel Rudolph.

"We would like to see a daily close above the latter being made before we become medium-term bullish again."

"Gold really needs to break above $1,700," agrees Scotia Mocatta director Peter Tse, "and close above that level to attract short-term buyers, but the momentum has not built up that much, even when we are right before the [Chinese] Lunar New Year and physical demand is steady."

Silver meantime hovered above $32 an ounce for much of this morning, before dipping back to where it started the week, as other commodities were also little changed.

European stock markets opened lower Tuesday morning, reversing yesterday's gains, before regaining some ground by lunchtime.

Germany's DAX Index was down more than 1% on the day at one point, before recovering some losses after ZEW surveys showed better-than-expected improvement in German and Eurozone-wide economic sentiment.

U.S. markets reopen today after a holiday on Monday.

At its policy meeting Tuesday, the Bank of Japan (BoJ) announced it will adopt a 2% inflation target, double the previous goal, a move that had previously been suggested by the new government of prime minister Shinzo Abe, who was elected last month.

The BoJ also announced an open-ended program of buying ¥13 trillion ($146 billion) of mainly short-term government debt a month starting in January 2014, when its current quantitative easing program is due to end, as part of efforts to raise inflation to the 2% target.

"This is a step toward bold monetary easing," Abe said in response to the BoJ announcement.

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