Apparently "gold buying day" in India has done little to stimulate global gold demand overnight with prices this morning spending most of the overnight trade in negative territory. While Indian gold jewelers apparently had to reduce prices to stimulate sales some sources have predicted sales growth for the day might be 15 to 20%.

On the other hand positive demand was seen from overall Indian gold imports figures as estimates suggest April imports will reach 121 metric tons from 52.8 tons last year.

In yet another bullish headline that has been largely discounted by the gold trade this morning Chinese gold reserves last month increased for the fifth straight month but the increase was slightly less than 500,000 ounces.

Certainly fears of a strong Dollar remain limiting although not a definitive force in the gold trade to start this week. In fact with gold not gaining significant ground off serious threats to trade progress earlier this week and more specifically failing to rally definitively off signs of rumors that Iran might retaliate against aggressive US military deployment in waters off its shores, it is clear that safe haven interest early this week is not a major item for the gold trade.

On the other hand, we would be careful selling gold at current levels because of the liquidation last week but also because of the history of US/Iran interactions which has usually resulted in everything short of actual military aggression.

While the gold market last week did not show bullish reaction to soft economic data, another setback in US/Chinese talks ahead of what was supposed to be the finish line, did foster some modest macroeconomic anxiety buying. Therefore, traders should expect expanded two-sided volatility this week with the $1,275 level continuing to build out as a general value zone.

While the IMF yesterday showed that India raised its gold holdings by 3.7 tonnes that was offset by news that Qatar lowered its gold holdings by 3.11 tonnes.

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