Gold Updates

Advisory Data:-

Gold slipped sharply today, facing selling pressure after a fabulous rise in the last session as the US Dollar edged up further today, broadly maintaining its positive movement from the lowest level in five months as global equities retreated after the recent enthusiasm after an array of week economic data last week and Spain reportedly stated that it is in to rush to seek outside financial aid. The greenback had tested lows near 1.3200 against the Euro amid a massive rise in global equities and commodity prices in last few days. However, the currency broke under 1.3000 levels last week and neared 1.2900 mark today. This hurt Gold and the COMEX futures are down $14 at $1764 per ounce.

COMEX futures continued to explore new highs and surged towards a fresh seven month high near $1790 per ounce on 21st September amid excellent buying support. The metal surged in last few weeks as the US dollar wilted and commodity prices and global equities rallied. Gold futures advanced sharply after the US Fed said that it would buy $40 billion of mortgage-backed securities each month until it starts to see the labor market pick up. The metal has gained nearly 200 dollars in last six weeks.

The weak economic data helped keep the metal afloat even as the US dollar gained after falling to five month lows. US manufacturing ended its weakest quarter of growth in three years this month, while the Eurozone private-sector activity contracted at its fastest pace since June 2009, extending a poor run in last few months. China's manufacturing activity also contracted in September for the 11th straight month, indicating that the slowdown in the world's second largest economy is continuing.

The stock markets have been in an extended up move on ideas that the global central bankers would print money to cushion the world economy from plummeting into another recession. In the first week of September, the European Central Bank (ECB) agreed a new bond-buying programme to lower struggling euro zone countries' borrowing costs. The ECB chairman Margio Draghi said that the new bond-buying programme, aimed at the secondary market, would safeguard the monetary policy transmission in all countries in the euro zone area.

While the ECB set up the stage for a quantitative easing binge and the US Fed followed it quite aptly, the Bank of Japan (BOJ) also swung in the action. The BOJ increased its asset buying and loan programme, by 10 trillion yen ($127 billion) to 80 trillion yen, with the increase earmarked for purchases of government bonds and treasury discount bills.

These measures supported the financial markets and there was speculation that Spain has moved closer to asking for a bailout. The pool of potential liquidity associated with the massive central bank easing took Gold near $1800 before some sell off occurred only to bring the bulls back in the metal with a renewed vigor. For the MCX Gold futures, the mid September trades witnessed a fascinating spurt, taking the benchmark futures to fresh highs of Rs 32400 though a sharp rise in the Indian Rupee pulled it lower thereafter.

The Indian currency hit its four-month highs yet again today as local equities soared amid favorable global environment and the slew of measures taken by the government on the domestic policy front. The currency neared 53 per US dollar in the morning trades today. COMEX futures failed to hold on above $1770 levels and witnessed a heavy correction that set up a similar sell off in local futures too. MCX Gold futures had witnessed a drop in last week even as the global cues remained supportive on the Rupee effect and neared Rs 31500 after breaking under Rs 32 levels. The prices fell further today and the counter tested lows under Rs 31300. The contract trades at Rs 31304, down Rs 201 per 10 grams or 0.64% on the day. The open interest is up by 4.55% on the day. Further drop is possible with next support emerging around Rs 31200 mark.