COMEX Gold futures are trying to extend the recent spree of gains as
Euro consolidated well above 1.4300 against the dollar in mid morning
Asia trades. The Dollar's impressive run to a three and half month
highs against the Euro had triggered a massive sell off in Gold last
week but the commodity is well supported on ideas that safe haven
demand would help cap the losses for prices after the futures tanked
more than $130 from their all time highs in the last three weeks.
Gold
dropped in the fortnight ended 19 December with the local futures
coming off Rs 17000 per 10 grams mark- an important barrier. The
commodity continued a drop below after prices topped out at all time
highs of $1230 per ounce as the US Dollar strengthened against a basket
of currencies and a general wave of risk aversion in the global markets
following worries over sovereign defaults and year end profit selling
eroded the appeal of the yellow metal.
The commodity plummeted
to a one month low on the COMEX Division of the New York Mercantile
Exchange on 18th December before recovering. The most active gold
contract for February delivery finished at 1,112.70 dollars an ounce on
Friday. Earlier in the month, fueled by S&P's downgrade of Greece's
credit rating and the possibility of more downgrades of Euro Zone
sovereign debt, particularly Spain and Ireland, dollar surged to a
fresh 3 and half month high against the Euro.
However, the lurch
higher for the dollar has been no surprise as the greenback had
displayed a persistent resistance to drop beyond 1.5000 against the
Euro earlier. The dollar also received support from haven flows as
traders had to cope with a couple of geopolitical-induced wobbles -
namely, talk of an Iranian incursion into an Iraq oil field (initially
denied, but later confirmed), and chatter about a possible coup in
Pakistan.
However, the rebound from one month low should likely
keep going for gold as it has acted as an opportunity to enter long for
all those who missed out on the fabulous run in the commodity which
rose nearly in a vertical manner after India's 200 tonne gold grab from
the IMF provided strong cues about the central bankers diversifying
their forex holdings into the yellow metal. Domestic gold market may
also find the current drop to its benefit as traders get ready for the
domestic wedding season demand to intensify in the days to come.