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Wednesday, January 14, 2009

Gold holds up despite dollar strength, equities rise

Yellow metal gaining fervor as yesterday's rebound brings bulls back in contention

Gold continued to add to its yesterday's gains, notwithstanding a firm undertone in the US dollar and a rebound in the global equities. Gold rose in Asia and managed to hold on in the London trades as crude oil prices supported the commodity, reversing the short-term momentum right in the favor of bulls.

The possibility of the current turbulence on the global economic front assisting the metal with its safe haven status bought some respite for Gold bulls. The commodity has been battered in the current week as the strength in the US dollar and a general weakness in commodity prices pulled the metal well below $850 and spurred concerns about a further drop in the pries of the yellow metal.

However, the prices rose in New York yesterday night and further buying interest was seen in Asian trades as the latest rebound lead traders to believe that $800 is likely to act as a very good support for the COMEX Gold in near term.

Meanwhile, the Euro zone industrial production plunged by a record amount year-on-year in November, signalling a deepening recession and strengthening market views the ECB will cut interest rates by 50 basis points on Thursday.

Industrial output in the 15 countries using the euro in November fell 1.6 percent on the month and 7.7 percent year-on-year -- the steepest annual drop since records started in 1990, the European Union statistics office said on Wednesday.

Eurostat also revised downwards its October output data to a 1.6 percent monthly contraction from the previous 1.2 percent drop and a 5.7 percent year-on-year fall from 5.3 percent.

COMEX Gold futures for February rose from a low of $819.50 per ounce and neared $830 in the electronic session. The counter currently trades at $826.90, up $6.20 per ounce from the previous close.

MCX Gold futures are trading at Rs 12977, up Rs 3 per 10 grams from its previous close. The counter went up above the watershed Rs 13000 mark in the intraday moves but has been failing to hold above due to the strength in the Indian rupee. Indian rupee is trading higher today as gains in the local equity market supported the currency and in turn pressures the rupee denominated assets on the local commodity bourses.

source: Capital Market
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