Gold climbed to its highest level in six weeks on Friday after data showed U. S. core inflation in April rose more than expected, up 0.3% in April from March. This boosted the precious metal's appeal as a hedge against rising prices.

According to Sun Zhaoxue, chariman of the China Gold Association, "the country should boost its gold holdings to 3% of its total foreign exchange reserves within five years, compared with 1.6% now." China's rare disclosure of its gold holdings could be a sign it will step up its gold purchases, as it worries that inflation or a slide in the dollar may erode the value of its foreign reserves.

Gold is also deriving support from fears over the health of the global economy after a spate of disappointing economic data. After the rise in core inflation and fall in U. S. April retail sales; German gross domestic product (GDP) contracted by a much larger than expected 3.8% in the first three months of
2009.

Gold is likely to trade down during the day against a backdrop of rupee strengthening by more than 2.25%. We will also see an improvement in risk appetite among investors following positive U. S. data and expectation of a stable government in India which may trigger further downside in gold prices.

Gold is trading lower in the range, taking support at 14740-750 levels. Gold is expected to push lower on breaking the support at 14740-750 levels. Thus, one can remain short in Gold at 14700, targeting 14550 and 14480.

Silver prices also have also moved down from the recent highs of 23150-200 levels. Silver is expected to take support at 22200 levels. Breaking this, Silver can fall southwards to 21750-800 levels.