Yellow metal lingers around $940 after recent array of gains
Gold witnessed a sideways movement in the week, finding a good support at $900 per ounce mark for the benchmark COMEX futures as the signs that underlying demand for the commodity would remain strong in case of a substantial correction spuured the optimism in the yellow metal. The commodity started the week on a weak note as the rally to $1000 mark showed signs of being overdone and selling continued to take a toll on the yellow metal amid a firm undertone in the US dollar.
The economic environment continued to deteriorate and a consensus built up that the world is headed towards a long period of shrinking economic activity.
Meanwhile, the US dollar continued to appreciate as the BOE and the ECB delivered a well-expected interest rate reduction of 50 basis points each. In spite of the dollar strength, Gold rebounded form lower levels on expectation that underlying demand trend remains strong.
The world largest ETF the SPDR was holding its position of Gold. The gold holdings of SPDR Gold Trust have stuck at 1,029.3 tons. The markets saw an astounding rally since January till 20th Feb 2009 on the news that the world's biggest ETFs are increasing their holding in Gold. Weakness in global financial markets also caused Gold to touch its one year highs.
On a more fundamental note, Gold remains well supported on physical demand side as the world's central bank's are likely to enhance their holdings of the yellow metal amid continued turmoil in the global markets and fears of fiat currencies losing their value. This is particularly true of the emerging markets.
Russia is likely to up the ante for Gold in near term as the country's central bank tries to augment its forex currency reserves. Russia has just announced that in January it bought 34 tonnes for its gold and foreign exchange reserves, and it intends to keep on Buying Gold for its reserves, thus activating its stated policy of increasing gold reserves to 10% of total gold and foreign exchange reserves.
The latest data reinforces the view that, in the last few years, a dramatic rise in Russia's gold and currency reserves is caused by only by an increasingly steady influx of petrodollars into Russia and Central Bank's intensive dollar acquisition policy is also one of the prime reasons behind the latest surge.
COMEX Gold stepped up from $900 per ounce mark in the middle of the week and currently trades at $935.30, up $7.50 an ounce from the previous close. MCX Gold futures for April are quoting at Rs 15545, up Rs 148 per 10 grams or nearly 1% from the previous close. The open interest in the counter is up 1.60% so far.
source: Capital Market
