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Friday, January 23, 2009

Gold zooms up on constant buying support

London trades see a sharp reversal in the commodity

Gold raced up in the electronic trades today hitting a high of $880 per ounce, as the commodity seemed to have de-linked from pressures exerted by the continued strength of the US dollar and the physical demand aspect came into being instead.

The commodity started the day in a flat manner, not moving much as traders took a cautions stance ahead of the weekend. The global equities continued to reel under stress and the Gold prices, though having well supported on the same count, faced some selling on the higher side. The commodity had shot up sharply earlier in the week but dollar's persistent firmness is keeping the gains limited for yellow metal.

However, the London trades witnessed a spectacular rebound in the commodity as the the counter seems to have gotten a very good boost from the last week's dismal output data from South Africa, the largest producer of the commodity. South Africa's gold production decreased by 8.7 percent year-on-year in November 2008, making the momentum turn starkly bullish for the commodity.

Meanwhile, the US dollar continued to trade near its six week high and hovered around 1.2800 mark against the Euro. The slight recovery in the Eurozone PMIs, which are an early indication of how the economy is performing, will likely confirm the European Central Bank's view that a pause in its series of rate cuts is needed next month.

The ECB has cut its key interest rate in each of the last four months, but has indicated that it will not move again until March.

The European Commission Monday said it now expects the euro-zone economy to contract by 1.9% this year. In November, it predicted a 0.1% expansion.

COMEX Gold was last seen quoting at $870.20, up $11.40 per ounce from the last close. The MCX Gold futures for February are trading at Rs 13788, up Rs 247 per 10 grams or 1.80% from the previous close with a massive 9% increase in the open interest.

source: Capital Market
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