(eToro Blog ) Gold prices moved higher last week, as investors continue to believe that higher inflation is likely to seep into global economies making hard assets such as gold a beneficial asset to hold in a portfolio. As financial turbulence in Europe deepened toward the end of the week, demand for precious metals as a safe haven gained strength.

Greece's Prime Minister George Papandreou is finalizing the fifth round of deficit cuts to comply with an international bailout. Greek bonds slumped on concern that a potential extension of the nation's bond maturities would deter the European Central Bank from accepting the debt as collateral.

The ECB has warned that it will no longer accept Greek government bonds as collateral in the event of a restructuring. While the austerity versus restructuring standoff is set to continue, the ECB looks increasingly isolated in the debate against restructuring, although it continues to hold the key card as Greece's major creditor via its banking system. Perhaps of most concern, Spanish yields have been rising, with the 10 year up 21 basis points on the week.

Early in the week, gold prices tested support levels near the 50-day moving average near 1,470. The up-trend in the yellow metal was able to hold support. A break below the 50-day moving average would lead to a test of the 1,450 range. On Friday, gold tested resistance near the 20-day moving average near 1,510. A break of the 20-day moving average will lead to a test of the 1,525 level. The 5-day moving average has turned positive and is poised to test the 20-day moving average which could lead to additional upward momentum for gold prices. With an RSI index close to 56, which tested support early in the week near 50, the market is neutral and could easily see increased momentum.

Copyright 2011 eToro Blog

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