Gold Jumps On MCX, Rupee Off Recent Highs

MCX Gold futures shot up in late afternoon trades, surging by nearly Rs 200 on the day as the rupee came off its three-month highs. The global prices consolidated around $1690 per ounce after the metal hit a one-month high in the last week. Rupee dropped nearly 30 paise and neared 54 levels against the US Dollar. The COMEX Gold futures had neared $1700 per ounce mark amid a weak undertone in the US dollar and good demand prospects. The metal is lingering at $1688.30 per ounce right now, up $1.30 per ounce on the day.

US dollar is hovering around 1.3320 against the Euro as traders eyed yet another European sovereign debt conference. European finance ministers will meet in Brussels later today to discuss options for debt-riddled Cyprus, Greece and Spain. The Federal Reserve Chairman Ben Bernanke stated last week that the central bank had tools to exit easy policy stance before inflation appears in US Bernanke said that Federal Reserve will continue to monitor financial situation and will act in case of financial stability. He said that there was moderate improvement in the labor market.

Meanwhile, the US Federal Reserve may have underestimated the looming 2007 global financial crisis, released transcripts from its meetings that year have shown. The documents suggested Fed Governor Ben Bernanke wanted to hold off from addressing rising panic in the markets. Bernanke noted in December 2007 that he did not expect insolvency or near insolvency among major financial institutions.

World Gold Council (WGC) noted in a report last week that the demand for Gold is likely to rise as the world was heading to multi currency system. This was because of the uncertainty surrounding around Euro and US Dollar. China Renminbi is likely to emerge as a genuine international currency as Chinese government was easing its control. Official asset managers are expected to increase their interest in Gold on account of doubt on global monetary arrangements and uncertainty and transition and investment currencies.

Meanwhile, the Indian demand is expected to benefit due to the recent spell of appreciation in the Indian Rupee. Rupee has gained impressively in last few days as local equities surged to two-year highs. The currency is lingering around three-month highs against the US dollar and has ensured that the local spot gold remains in a range of Rs 30500-30800.

These are quite attractive levels and demand from retail buyers is expected to get a boost if prices stabilize around this corridor. MCX Gold futures had slipped to lows under Rs 30600 in the thin trading session on Saturday and edged up impressively today. The metal trades at Rs 30769, up Rs 188 per 10 grams on the day. Lows under Rs 30600 have witnessed good bargain buying and short covering. The open interest is down by nearly 3% on the day so far.