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Monday, May 11, 2009

COMEX Gold drops $5; glitters on MCX

Weak Rupee keeps the domestic gold in green

International bullion dropped by as much as $5 an ounce today as traders moved back to the perceived safety of the U.S. dollar and the Japanese yen after economic data and bank-sector stress results had led to greenback selling last week. U.S. Federal Reserve Chairman Ben Bernanke is due to deliver a speech on Monday about the stress tests.

The gold futures are not able to pick up despite the risk aversion in the markets, which made the dollar and Yen rally today. The reason is that globally sentiments got a boost from last week's US bank stress test results that were better than expected and uplifted sentiments in bank stocks. Better-than-expected employment data also added to market comfort and confidence. Last week these two releases were only the most important catalyst for rally in gold.

In domestic markets as well all the base metals slipped, with copper being hurt the most. However, domestic silver is trading slightly higher following the gains the precious metals complex. MCX June Copper slipped 2.48 % at Rs 228.05 per kg. Benchmark aluminum futures were down 0.7% to Rs 74.5 per kg.

MCX June Gold is trading higher Rs 44 at Rs 14550 per 10 grams. The counter is facing a stiff resistance near 14580 levels and a break of Rs 14505 levels may take it to 14460 and 14400 levels today. The drop in the Indian Rupee served as a catalyst for gains in Indian Gold futures.

The Indian Rupee dropped from 3-week high level today and was quoting at 49.5 per US dollar, which in turn supported the Indian commodities as the depreciating Rupee makes the Rupee denominated assets cheaper for other currency holder. Indian shares fell 1.6% on Monday to their lowest close this month, as jitters national elections may produce a split verdict sparked profit taking. The election results are due on Saturday, and exit polls after the month-long elections end on Wednesday. Investors are worried neither the ruling Congress party coalition or the main opposition Bharatiya Janata Party-led group will win a clear majority on its own, leaving the possibility of a loose coalition of regional parties.
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