Gold Running Out Of Steam, Highs Near $1500 Now Seem Distant

MCX Gold futures are trading in red, witnessing some profit selling as the metal turned under $1470 per ounce, easing after the recent gains in the international markets. A pledge to ultra soft money regime from the major global central bankers has been the mainstay for Gold prices in last few days and the Reserve Bank Of Australia (RBA) further supported these sentiments by cutting its benchmark rates to a historic low today. However, the yellow metal was reeling under the burden of its own weight as a spirited run towards $1490 per ounce last week.

The RBA slashed interest rates by 25 basis points to a historic low of 2.75 per cent, the first reduction this year. The decision followed a spate of soft economic data that increased calls by industry groups and other observers for a lower cash rate. This boosted the sentiments in equities in the region and most of the indices are quoting with steady gains.

Last week, the ECB cut its benchmark interest rates by 25 basis points to 50 basis points and the bank President Mario Draghi suggested that policymakers might have an “open mind” on lowering the deposit rate below zero for the first time. Earlier in the week, the US Fed stated that it stands ready to increase or reduce accommodation depending upon the labor market and inflation. The mention of a possible increase caught investors' attention since previously the focus of financial markets was on when policymakers might scale back the bond-buying program known as quantitative easing.

These cues lifted Gold to a two-week high near $1490 per ounce on Friday but the commodity gave up bulk of these gains and dropped more than 20 dollars on the same day. Prices dropped yet again today, extending the broad decline from highs near $1500. The metal is quoting at $1464.40, down $3.60 per ounce on the day. MCX Gold futures for June are tentatively holding on just above Rs 27 k and could ease off further in case this mark breaks convincingly. The counter is currently trading at Rs 27019, down Rs 77 per 10 grams or 0.28% on the day with 3% increase in the open interest.

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